. “THE C CHRONICLES 
a ‘OF AMERICA SERIES 
ALLEN JOHNSON 

EDITOR 


| THE AGE 


DUKE 


UNIVERSITY © 


LIBRARY 


TEXTBOOK EDITION 


THE CHRONICLES 
OF AMERICA SERIES 
ALLEN JOHNSON 
EDITOR 
GERHARD R. LOMER 


CHARLES W. JEFFERYS 
ASSISTANT EDITORS 


THE AGE 
OF BIG BUSINESS 


A CHRONICLE OF THE 
CAPTAINS OF INDUSTRY 
BY BURTON J. HENDRICK 


NEW HAVEN: YALE UNIVERSITY PRESS 
TORONTO: GLASGOW, BROOK & CO. 
LONDON: HUMPHREY MILFORD 
OXFORD UNIVERSITY PRESS 


CONTENTS 


f. INDUSTRIAL AMERICA AT THE END OF 
THE CIVIL WAR Page 


Ii. THE FIRST GREAT AMERICAN TRUST is 


Il. THE EPIC OF STEEL ss 


IV. THE TELEPHONE: AMERICA’S MOST POET- 
ICAL ACHIEVEMENT “§ 


V. THE DEVELOPMENT OF PUBLIC UTIL- 
ITIES " 


VI. MAKING THE WORLD’S AGRICULTURAL 
MACHINERY 


VII. THE DEMOCRATIZATION OF THE AUTO- 
MOBILE ti 


BIBLIOGRAPHICAL NOTE “ 


INDEX “ 


4415770 


189 


191 


THE AGE OF BIG BUSINESS 


CHAPTER I 
INDUSTRIAL AMERICA AT THE END OF THE CIVIL WAR 


A COMPREHENSIVE survey of the United States, at 
the end of the Civil War, would reveal a state of 
society which bears little resemblance to that of 
today. Almost all those commonplace fundamen- 
tals of existence, the things that contribute to 
our bodily comfort while they vex us with economic 
and political problems, had not yet made their 
appearance. The America of Civil War days 
was a country without transcontinental railroads, 
without telephones, without European cables, or 
wireless stations, or automobiles, or electric lights, 
or sky-scrapers, or million-dollar hotels, or trolley 
cars, or a thousand other contrivances that today 
supply the conveniences and comforts of what we 


eall our American civilization. The cities of that 
1 


415770 


2 THE AGE OF BIG BUSINESS 


period, with their unsewered and unpaved streets, — 
their dingy, flickering gaslights, their ambling 
horse-cars, and their hideous slums, seemed ap- 
propriate settings for the unformed social life and 
the rough-and-ready political methods of American 
democracy. The railroads, with their fragile iron 
rails, their little wheezy locomotives, their wooden 
bridges, their unheated coaches, and their kero- 
sene lamps, fairly typified the prevailing frontier 
business and economic organization. But only by 
talking with the business leaders of that time could 
we have understood the changes that have taken 
place in fifty years. For the most part we speak a 
business language which our fathers and grand- 
fathers would not have comprehended. The word 
“trust”’ had not become a part of their vocabulary; 
“restraint of trade”’ was a phrase which only the 
antiquarian lawyer could have interpreted; “in- 
terlocking directorates,” “holding companies,” 
“subsidiaries,” “underwriting syndicates,” and 
“community of interest’? —all this jargon of 
modern business would have signified nothing to 
our immediate ancestors. Our nation of 1865 was 
' a nation of farmers, city artisans, and industrious, 
independent business men, and small-scale manu- 
facturers. Millionaires, though they were not 


AT THE END OF THE CIVIL WAR 3 


~ unknown, did not swarm all over the land. Lux- 
ury, though it had made great progress in the latter 
years of the war, had not become the American 
standard of well-being. The industrial story of the 
United States in the last fifty years is the story of 
the most amazing economic transformation that 
the world has ever known; a change which is fitly 
typified in the evolution of the independent oil- 
driller of western Pennsylvania into the Standard 
Oil Company, and of the ancient open air forge on 
the banks of the Allegheny into the United States 
Steel Corporation. 

The slow, unceasing ages had been accumulating 
a priceless inheritance for the American people. 
Nearly all of their natural resources, in 1865, were 
still lying fallow, and even undiscovered in many 
instances. Americans had begun, it is true, to 
exploit their more obvious, external wealth, their 
forests and their land; the first had made them one 
of the world’s two greatest shipbuilding nations, 
while the second had furnished a large part of the 
resources that had enabled the Federal Govern- 
ment to fight what was, up to that time, the great- 
est war in history. But the extensive prairie plains 
whose settlement was to follow the railroad exten- 
sions of the sixties and the seventies — Kansas, ¥ 


4 THE AGE OF BIG BUSINESS 


Nebraska, Iowa, Oklahoma, Minnesota, the Dako- 
tas — had been only slightly penetrated. This 
region, with a rainfall not too abundant and not 
too scanty, with a cultivable soil extending from 
eight inches to twenty feet under the ground, with 
hardly a rock in its whole extent, with scarcely a 
tree, except where it bordered on the streams, has 
been pronounced by competent scientists the finest 
farming country to which man has ever set the 
plow. Our mineral wealth was likewise lying every- 
where ready to the uses of the new generation. 
The United States now supplies the world with half 
its copper, but in 1865 it was importing a consider- 
able part of its own supply. It was not till 1859 
that the first “‘oil gusher”’ of western Pennsylvania 
opened up an entirely new source of wealth. 
Though we had the largest coal deposits known to 
geologists, we were bringing large supplies of this 
indispensable necessity from Nova Scotia. It has 
been said that coal and iron are the two mineral 
products that have chiefly affected modern civil- 
ization. Certainly the nations that have made the 
greatest progress industrially and commercially 
— England, Germany, America — are the three 
that possess these minerals in largest amount. 
From sixty to seventy per cent of all the known 


AT THE END OF THE CIVIL WAR 5 


coal deposits in the world were located in our na- 
tional domain. Nature had given no other nation 
anything even remotely comparable to the four 
hundred and eighty square miles of anthracite in 
western Pennsylvania and West Virginia. Enor- 
mous fields of bituminous lay in those Appalachian 
ranges extending from Pennsylvania to Alabama, 
in Michigan, in the Rocky Mountains, and in the 
Pacific regions. In speaking of our iron it is 
necessary to use terms that are even more extrava- 
gant. From colonial times Americans had worked 
the iron ore plentifully scattered along the Atlan- 
tic coast, but the greatest field of all, that in 
Minnesota, had not been scratched. From the 
settlement of the country up to 1869 it had mined 
only 50,000,000 tons of iron ore; while up to 1910 
we had produced 685,000,000 tons. The streams 
and waterfalls that, in the next sixty years, were 
to furnish the power that would light our cities, 
propel our street-cars, drive our transcontinental 
trains across the mountains, and perform numer- 
ous domestic services, were running their useless 
courses to the sea. 

Industrial America is a product of the decades 
succeeding the Civil War; yet even in 1865 we 
were a large manufacturing nation. The leading 


6 THE AGE OF BIG BUSINESS 


characteristic of our industries, as compared with 
present conditions, was that they were individu- 
alized. Nearly all had outgrown the household 
stage, the factory system had gained a foothold 
in nearly every line, even the corporation had made 
its appearance, yet small-scale production prevailed 
in practically every field. In the decade preced- 
ing the War, vans were still making regular-trips 
through New England and the Middle States, leav- 
ing at farmhouses bundles of straw plait, which the 
members of the household fashioned into hats. 
The farmers’ wives and daughters still supple- 
mented the family income by working on goods for 
city dealers in ready-made clothing. We can still 
see in Massachusetts rural towns the little shoe 
shops in which the predecessors of the existing fac- 
tory workers soled and heeled the shoes which shod 
our armies in the early days of the Civil War. 
Every city and town had its own slaughter house; 
New York had more than two hundred; what is 
now Fifth Avenue was frequently encumbered by 
large droves of cattle, and great stockyards oc- 
cupied territory which is now used for beautiful 
clubs, railroad stations, hotels, and the highest 
class of retail establishments. 

In this period before the Civil War compara- 


AT THE END OF THE CIVIL WAR 7 


tively small single owners, or frequently copartner- 
ships, controlled practically every industrial field. 
Individual proprietors, not uncommonly powerful 


’ families which were almost feudal in character, 


owned the:great cotton and woolen mills of New 
England. Separate proprietors, likewise, con- 
trolled the iron and steel factories of New York 
State and Pennsylvania. Indeed it was not until 
the War that corporations entered the iron indus- 
try, now regarded as the field above all others 
adapted to this kind of organization. The manu- 
facture of sewing machines, firearms, and agricul- 
tural implements started on a great scale in the 
Civil War; still, the prevailing unit was the private 
owner or the partnership. In many manufacturing 
lines the joint stock company had become the pre- 
vailing organization, but even in these fields the 
element that so characterizes our own age, that of 
combination, was exerting practically no influence. 

Competition was the order of the day: the indus- 
trial warfare of the sixties was a free-for-all. A 
mere reference to the status of manufactures in 
which the trust is now the all-prevailing fact will 
make the contrast clear. In 1865 thousands of in- 
dependent companies were drilling oil in Pennsyl- 
vania and there were more than two hundred which 


8 THE AGE OF BIG BUSINESS 


were refining the product. Nearly four hundred 
and fifty operators were mining coal, not even 
dimly foreseeing the day when their business would 
become a great railroad monopoly. The two hun- 
dred companies that were making mowers and 
reapers, seventy-five of them located in New York 
State, had formed no mental picture of the future 
International Harvester Company. One of our 
first large industrial combinations was that which 
in the early seventies absorbed the manufacturers 
of salt; yet the close of the Civil War found fifty 
competing companies making salt in the Saginaw 
Valley of Michigan. In the same State, about fifty 
distinct ownerships controlled the copper mines, 
while in Nevada the Comstock Lode had more 
than one hundred proprietors. The modern trust 
movement has now absorbed even our lumber and 
mineral lands, but in 1865 these rich resources 
were parceled out among a multiplicity of owners. 
No business has offered greater opportunities to the 
modern promoter of combinations than our street 
railways. In 1865 most of our large cities had 
their leisurely horse-car systems, yet practically 
every avenue had its independent line. New York 
had thirty separate companies engaged in the busi- 
ness of local transportation. Indeed the Civil War 


EOS 


AT THE END OF THE CIVIL WAR 9 


period developed only one corporation that could 
be deseribed as a “trust” in the modern sense. 
This was the Western Union Telegraph Company. 
Incredible as it may seem, more than fifty com- 
panies, ten years before the Civil War, were en- 
gaged in the business of transmitting telegraphic 
messages. These companies had built their tele- 
graph lines precisely as the railroads had laid their 
tracks; that is, independent lines were constructed 
connecting two given points. It was inevitable, 
of course, that all these scattered lines should come 
under a single control, for the public convenience 
could not be served otherwise. This combination 
was effected a few years before the War, when the 
Western Union Telegraph Company, after a long 
and fierce contest, succeeded in absorbing all its 
competitors. Similar forces were bringing to- 
gether certain continuous lines of railways, but the 
creation of huge trunk systems had not yet taken 
place. How far our industrial era is removed from 
that of fifty years ago is apparent when we recall 
that the proposed capitalization of $15,000,000, 
caused by the merging of the Boston and Worcester 
and the Western railroads, was widely denounced 
as “monstrous” and as a corrupting force that 
would destroy our Republican institutions. 


10 THE AGE OF BIG BUSINESS 


Naturally this small-scale ownership was re- 
flected in the distribution of wealth. The “‘swol- 
len fortunes” of that period rested upon the same 
foundation that had given stability for centuries 
to the aristocracies of Europe. Social preémi- 
nence in large cities rested almost entirely upon 
the ownership of land. The Astors, the Goelets, the 
Rhinelanders, the Beekmans, the Brevoorts, and 
practically all the mighty families that ruled the 
old Knickerbocker aristocracy in New York were 
huge landed proprietors. Their fortunes thus had 
precisely the same foundation as that of the Prus- 
sian Junkers today. But their accumulations com- 
pared only faintly with the fortunes that are com- 
monplace now. How many “millionaires” there 
were fifty years ago we do not precisely know. 
The only definite information we have is a pam- 
phlet published in 1855 by Moses Yale Beach, 
proprietor of the New York Sun, on the “Wealthy 
Men of New York.” This records the names of 
nineteen citizens who, in the estimation of well- 
qualified judges, possessed more than a million 
dollars each. The richest man in the list was Wil- 
liam B. Astor, whose estate is estimated at $6,000- 
000. The next richest man was Stephen Whitney, 
also a large landowner, whose fortune is listed at 


s 
AT THE END OF THE CIVIL WAR Il 


$5,000,000. Then comes James Lenox, again a 
landed proprietor, with $3,000,000. The man who 
was to accumulate the first monstrous American 
fortune, Cornelius Vanderbilt, is accredited with 
a paltry $1,500,000. Mr. Beach’s little pamphlet 
sheds the utmost light upon the economic era pre- 
ceding the Civil War. It really pictures an indus- 
trial organization that belongs as much to ancient 
history as the empire of the Cesars. His study 
lists about one thousand of New York’s “wealthy 
citizens.”” Yet the fact that a man qualified for 
entrance into this Valhalla who had $100,000 to his 
credit and that nine-tenths of those so chosen pos- 
sessed only that amount shows the progress con- 
centrated riches have made in sixty years. How 
many New Yorkers of today would look upon a 
man with $100,000 as “wealthy’’? 

The sources of these fortunes also show the eco- 
nomic changes our country has undergone. To- 
day, when we think of our much exploited million- 
aires, the phrase “‘captains of industry” is the 
accepted description; in Mr. Beach’s time the 
popular designation was “merchant prince.” His 
catalogue contains no “oil magnates” or “steel 
kings” or “railroad manipulators”; nearly all 
the industrial giants of ante-bellum times—as 


12 THE AGE OF BIG BUSINESS 


distinguished from the socially prominent whose 
wealth was inherited — had heaped together their 
accumulations in humdrum trade. Perhaps Peter 
Cooper, who had made a million dollars in the 
manufacture of isinglass and glue, and George Law, 
whose gains, equally large, represented fortu- 
nate speculations in street railroads, faintly suggest 
the approaching era; yet the fortunes which are 
really typical are those of William Aspinwall, who 
made $4,000,000 in the shipping business, of A. T. 
Stewart, whose $2,000,000 represented his earn- 
ings as a retail and wholesale dry goods mer- 
chant, and of Peter Harmony, whose $1,000,000 
had been derived from happy trade ventures in 
Cuba and Spain. Many of the reservoirs of this 
ante-bellum wealth sound strangely in our modern 
ears. John Haggerty had made $1,000,000 as an 
auctioneer; William L. Coggeswell had made half 
as much as a wine importer; Japhet Bishop had 
rounded out an honest $600,000 from the profits 
of a hardware store; while Phineas T. Barnum 
ranks high in the list by virtue of $800,000 accumu- 
lated in a business which it is hardly necessary to 
specify. Indeed his name and that of the great 
landlords are almost the only ones in this list that 
have descended to posterity. Yet they were the 


AT THE END OF THE CIVIL WAR 13 


Rockefellers, the Carnegies, the Harrimans, the 
Fricks, and the Henry Fords of their day. 

Before the Civil War had ended, however, the 
transformation of the United States from a na- 
tion of farmers and small-scale manufacturers to 
a highly organized industrial state had begun. 
Probably the most important single influence was 
the War itself. Those four years of bitter con- 
flict illustrate, perhaps more graphically than any 
similar event in history, the power which military 
operations may exercise in stimulating all the pro- 
ductive forces of a people. In thickly settled na- 
tions, with few dormant resources and with prac- 
tically no areas of unoccupied land, a long war 
usually produces industrial disorganization and 
financial exhaustion. The Napoleonic wars had 
this effect in Europe; in particular they caused a 
period of social and industrial distress in England. 
The few years immediately following Waterloo 
marked a period when starving mobs rioted in the 
streets of London, setting fire to the houses of the 
aristocracy and stoning the Prince Regent when- 
ever he dared to show his head in public, when cot- 
ton spindles ceased to turn, when collieries closed 
down, when jails and workhouses were overflowing 
_with a wretched proletariat, and when gaunt and 


14 THE AGE OF BIG BUSINESS 


homeless women and children crowded the country 
highways. No such disorders followed the Civil 
War in this country, at least in the North and 
West. Spiritually the struggle accomplished much 
in awakening the nation to a consciousness of its 
great opportunities. The fact that we could spend 
more than a million dollars a day — expenditures 
that hardly seem startling in amount now, but 
which were almost unprecedented then — and that 
soon after hostilities ceased we rapidly paid off our 
large debt, directed the attention of foreign capital- 
ists to our resources, and gave them the utmost 
confidence in this new investment field. Immigra- 
tion, too, started after the war at a rate hitherto 
without parallel in our annals. The Germans who 
had come in the years preceding the Civil War had 
been largely political refugees and democratic 
idealists, but now, in much larger numbers, began 
the influx of north and south Germans whose dom- 
inating motive was economic. These Germans 
began to find their way to the farms of the Missis- 
sippi Valley; the Irish began once more to crowd 
our cities; the Slavs gravitated towards the 
mines of Pennsylvania; the Scandinavians settled 
whole counties of certain northwestern States; 
while the Jews began that conquest of the tailoring 


AT THE END OF THE CIVIL WAR 15 


industries that was ultimately to make them 
the clothiers of a hundred million people. For 
this industrial development, America supplied 
the land, the resources, and the business leaders, 
while Europe furnished the liquid capital and the 
laborers. 

Even more directly did the War stimulate our 
industrial development. Perhaps the greatest 
effect was the way in which it changed our trans- 
portation system. The mere necessity of con- 
stantly transporting hundreds of thousands of 
troops and war supplies demanded reconstruction 
and reéquipment on an extensive scale. The 
American Civil War was the first great conflict in 
which railroads played a conspicuous military part, 
and their development during those four years 
naturally left them in a strong position to meet the 
new necessities of peace. One of the first effects 
of the War was to close the Mississippi River; 
consequently the products of the Western farms 
had to go east by railroad, and this fact led to 
that preéminence of the great trunk lines which 
they retain to this day. Almost overnight Chi- 
cago became the great Western shipping center, 
and though the river boats lingered for a time on 
tbe Ohio and the Mississippi they grew fewer year 


16 THE AGE OF BIG BUSINESS 


by year. Prosperity, greater than the country 
had ever known, prevailed everywhere in the North 
throughout the last two years of the War. 

So, too, feeding and supplying an army of mil- 
lions of men laid the foundation of many of our 
greatest industries. The Northern soldiers in the 
early days of the war were clothed in garments so 
variegated that they sometimes had trouble in 
telling friend from foe, and not infrequently they 
shot at one another; so inadequately were our 
woolen mills prepared to supply their uniforms! 
But larger government contracts enabled the pro- 
prietors to reconstruct their mills, install modern 
machines, and build up an organization and a 
prosperous business that still endures. Making 
boots and shoes for Northern soldiers laid the 
foundation of America’s great shoe industry. Ma- 
chinery had already been applied to shoe manu- 
facture, but only to a limited extent; under the 
pressure of war conditions, however, American 
inventive skill found ways of performing mechan- 
ically almost all the operations that had formerly 
been done by hand. The McKay sewing machine, 
one of the greatest of our inventions, which was 
perfected in the second year of the war, did as much 
perhaps as any single device to keep our soldiers 


AT THE END OF THE CIVIL WAR 17 


well shod and comfortable. The necessity of feed- 
ing these same armies created our great packing 
plants. Though McCormick had invented his 
reaper several years before the war, the new agri- 
cultural machinery had made no great headway. 
Without this machinery, however, our Western 
farmers could never have harvested the gigantic 
crops which not only fed our soldiers but laid the 
basis of our economic prosperity. Thus the War 
directly established one of the greatest, and cer- 
tainly one of the most romantic, of our industries 
— that of agricultural machinery. 

Above all, however, the victory at Appomattox 
threw upon the country more than a million un- 
employed men. Our European critics predicted 
that their return to civil life would produce dire 
social and political consequences. But these 
critics were thinking in terms of their own coun- 
tries; they failed to consider that the United 
States had an immense unoccupied domain which 
was waiting for development. The men who 
fought the Civil War had demonstrated precisely 
the adventurous, hardy instincts which were most 
needed in this great enterprise. Even before the 
War ended, a great immigration started towards 
the mines and farms of the trans-Mississippi 


18 THE AGE OF BIG BUSINESS 


country. There was probably no important town 
or district west of the Alleghanies that did not 
absorb a considerable number. In most instances, 
too, our ex-soldiers became leaders in these new 
communities. Perhaps this movement has its 
most typical and picturesque illustration in the 
extent to which the Northern soldiers opened up 
the oil-producing regions of western Pennsylvania. 
Venango County, where this great development 
started, boasted that it had more ex-soldiers than 
any similar section of the United States. 

The Civil War period also forced into prominence 
a few men whose methods and whose achievements 
indicated, even though roughly and indistinctly, 
a new type of industrial leadership. Every pe- 
riod has its outstanding figure and, when the Civil 
War was approaching its end, one personality had 
emerged from the humdrum characters of the time 
—one man who, in energy, imagination, and gen- 
ius, displayed the forces that were to create a new 
American world. Although this man employed his 
great talents in a field, that of railroad transporta- 
tion, which lies outside the scope of the present 
volume, yet in this comprehensive view I may take 
Cornelius Vanderbilt as the symbol that links the 
old industrial era with the new. He is worthy of 


AT THE END OF THE CIVIL WAR 19 


more detailed study than he has ever received, for 
in personality and accomplishments Vanderbilt is 
the most romantic figure in the history of American 
finance. We must remember that Vanderbilt was 
born in 1794 and that at the time we are consider- 
ing he was seventy-one years old. In the matter 
of years, therefore, his career apparently belongs 
to the ante-bellum days, yet the most remarkable 
fact about this remarkable man is that his real life 
work did not begin until he had passed his seven- 
tieth year. In 1865 Vanderbilt’s fortune, consist- 
ing chiefly of a fleet of steamboats, amounted to 
about $10,000,000; he died twelve years later, in 
1877, leaving $104,000,000, the first of those co- 
lossal American fortunes that were destined to 
astound the world. The mere fact that this for- 
tune was the accumulated profit of only ten years 
shows perhaps more eloquently than any other cir- 
cumstance that the United States had entered a 
new economic age. That new factor in the life of 
America and the world, the railroad, explains his 
achievement. Vanderbilt was one of the most as- 
tonishing characters in our history. His physical 
exterior made him perhaps the most imposing fig- 
ure in New York. Inhisold age, at seventy-three, 
Vanderbilt married his second wife, a beautiful 


20 THE AGE OF BIG BUSINESS 


Southern widow who had just turned her thirtieth 
year, and the appearance of the two, sitting side by 
side in one of the Commodore’s smartest turnouts, 
driving recklessly behind a pair of the fastest trot- 
ters of the day, was a common sight in Central 
Park. Nor did Vanderbilt look incongruous in 
this brilliant setting. His tall and powerful frame 
was still erect, and his large, defiant head, ruddy 
cheeks, sparkling, deep-set black eyes, and snowy 
white hair and whiskers, made him look every inch 
the Commodore. These public appearances lent a 
pleasanter and more sentimental aspect to Vander- 
bilt’s life than his intimates always perceived. For 
his manners were harsh and uncouth; he was totally 
without education and could write hardly half a 
dozen lines without outraging the spelling-book. 
Though he loved his race-horses, had a fondness for 
music, and could sit through long winter evenings 
while his young wife sang old Southern ballads, 
Vanderbilt’s ungovernable temper had placed him 
on bad terms with nearly all his children— he 
had had thirteen, of whom eleven survived him — 
who contested his will and exposed all his eccentri- 
cities to public view on the ground that the man 
who created the New York Central system was ac- 
tually insane. Vanderbilt’s methods and his tem- 


AT THE END OF THE CIVIL WAR 21 


perament presented such a contrast to the com- 
monplace minds which had previously dominated 
American business that this explanation of his 
career is perhaps not surprising. He saw things in 
their largest aspects and in his big transactions he 
seemed to act almost on impulse and intuition. He 
could never explain the mental processes by which 
he arrived at important decisions, though these 
decisions themselves were invariably sound. He 
seems to have had, as he himself frequently said, 
almost a seer-like faculty. He saw visions, and 
he believed in dreams and in signs. The greatest 
practical genius of his time was a frequent attend- 
ant at spiritualistic seances; he cultivated person- 
ally the society of mediums, and in sickness he usu- 
ally resorted to mental healers, mesmerists, and 
clairvoyants. Before making investments or em- 
barking in his great railroad ventures, Vanderbilt 
visited spiritualists; we have one circumstantial 
account of his summoning the wraith of Jim Fiske 
to advise him in stock operations. His excessive 
vanity led him to print his picture on all the Lake 
Shore bonds; he proposed to New York City the 
construction in Central Park of a large monument 
that would commemorate, side by side, the names 


of Vanderbilt and Washington; and he actually 


22 THE AGE OF BIG BUSINESS 


erected a large statue to himself in his new Hud- 
son River station in St. John’s Park. His aiti- 
tude towards the public was shown in his remark 
when one of his associates told him that “each and 
every one” of certain transactions which he had 
just forced through ‘‘is absolutely forbidden by the 
statutes of the State of New York.” “My God, 
John!” said the Commodore, “you don’t suppose 
you can run a railroad in accordance with the stat- 
utes of the State of New York, do you?” “Law!” 
he once roared on a similar occasion, “‘“What do I 
care about law? Hain’t I got the power?” _ 
These things of course were the excrescences of 
an extremely vital, overflowing, imaginative, ener- 
getic human being; they are traits that not infre- 
quently accompany genius. And the work which 
Vanderbilt did remains an essential part of our eco- 
nomic organization today. Before his time a trip 
to Chicago meant that the passenger changed 
trains seventeen times, and that all freight had to 
be unloaded at a similar number of places, carted 
across towns, and reloaded into other trains. The 
magnificent railroad highway that extends up the 
banks of the Hudson, through the Mohawk Valley, 
and alongside the borders of Lake Erie — a water 
line route nearly the entire distance — was all but 


AT THE END OF THE CIVIL WAR-~ 23 | 


useless. It is true that not all the consolidation 
of these lines was Vanderbilt’s work. In 1853 
certain millionaires and politicians had linked to- 
gether the several separate lines extending from 
Albany to Buffalo, but they had managed the new 
road so wretchedly that the largest stockholders in 
1867 begged Vanderbilt to take over the control. 
By 1873 the Commodore had acquired the Hudson 
River. extending from New York to Albany, the 
New York Central extending from Albany to Buf- 
falo, and the Lake Shore which ran from Buffalo to 
Chicago. Ina few years these roads had been con- 
solidated into a smoothly operating system. If, in 
transforming these discordant railroads into one, 
Vanderbilt bribed legislatures and corrupted courts, 
if he engaged in the largest stock-watering opera. 
tions on record up to that time, and took advantage 
of inside information to make huge winnings on the 
stock exchange, he also ripped up the old iron rails 
and relaid them with steel, put down four tracks 
where formerly there had been two, replaced wood- 
en bridges with steel, discarded the old locomotives 
for new and more powerful ones, built splendid new 
terminals, introduced economies in a hundred di- 
rections, cut down the hours required in a New 
York-Chicago trip from fifty to twenty-four, made 


24 THE AGE OF BIG BUSINESS 


his highway an expeditious line for transport- 
ing freight, and transformed railroads that had 
formerly been the playthings of Wall Street and 
that frequently could not meet their pay-rolls into 
exceedingly profitable, high dividend paying prop- 
erties. In this operation Vanderbilt typified the 
era that was dawning — an era of ruthlessness, of 
personal selfishness, of corruption, of disregard of 
private rights, of contempt for law and legisla- 
tures, and yet of vast and beneficial achievement. 
The men of this time may have traveled roughshod 
to their goal, but after all, they opened up, in an 
amazingly short time, a mighty continent to the 
uses of mankind. The triumph of the New York 
Central and Hudson River Railroad under Van- 
derbilt, a triumph which dazzled European inves- 
tors as well as our own, and which represented an 
entirely different business organization from any- 
thing the nation had hitherto seen, appropriately 
ushered in the new business era whose outlines will 
be sketched in the succeeding pages. 


‘CHAPTER TI 
THE FIRST GREAT AMERICAN TRUST 


Wauaen Cornelius Vanderbilt died in 1877, America’s 
first great industrial combination had become an 
established fact. In that year the Standard Oil 
Company of Ohio controlled at least ninety per 
cent of the business of refining and marketing 
petroleum. A new portent had appeared in our 
economic life, a phenomenon that was destined 
to affect not only the social and business exist- 
ence of the every-day American but even his po- 
litical and legal institutions. 

It seems natural enough at the present time to 
refer to petroleum as an indispensable commodity. 
At the beginning of the Civil War, however, any 
such description would have been absurd. Though 
petroleum was not unknown, millions of American 
households were still burning candles, whale oil, 
and other illuminants. Noi until 1859 did our 


ancestors realize that, concealed in the rocks of 
25 


26 THE AGE OF BIG BUSINESS 


western Pennsylvania, lay apparently inexhaustible 
quantities of a liquid which, when refined, would 
give a light exceeding in brilliancy anything they 
had hitherto known. The mere existence of pe- 
troleum, it is true, had been a familiar fact for cen- 
turies. Herodotus mentions the oil pits of Baby- 
lon, and Pliny informs us that this oil was actually 
used for lighting in certain parts of Sicily. It had 
never become an object of universal use, simply 
because no one had discovered how to obtain it 
in sufficient quantities. No one had suspected, in- 
deed, that petroleum existed practically in the form 
of great subterranean rivers, lakes, or even seas. 
For ages this great natural treasure had been 
seeking to advertise its presence by occasionally 
seeping through the rocks and appearing on the 
surface of watercourses. It had been doing this 
all over the world —in China, in Russia, in Ger- 
many, in England, in our own country. Yet our 
obtuse ancestors had for centuries refused to take 
the hint. We can find much cause for self-con- 
gratulation in that it was apparently the American 
mind that first acted upon this obvious suggestion. 

In Venango County, Pennsylvania, petroleum 
floated in such quantities on the surface of a branch 
of the Allegheny River that this small watercourse 


THE FIRST GREAT AMERICAN TRUST 27 


had for generations been known as Oil Creek. The 
neighboring farmers used to collect the oil and 
use it to grease their wagon axles; others, more en- 
terprising, made a business of gathering the float- 
ing substance, packing it in bottles, and selling it 
broadcast as a medicine. The most famous of these 
concoctions, “‘Seneca Oil,” was widely advertised 
as a sure cure for rheumatism, and had an extensive 
sale in this country. “‘Kier’s Rock Oil’ afterwards 
had an even more extended use. Samuel M. Kier, 
who exploited this comprehensive cure-all, made no 
lasting contributions to medical science, but his 
method of obtaining his medicament led indirectly 
to the establishment of a great industry. In this 
western Pennsylvania region salt manufacture had 
been a thriving business for many years; the salt 
was obtained from salt water by means of arte- 
sian wells. This salt water usually came to the sur- 
face contaminated with that same evil-smelling oil 
which floated so constantly on top of the rivers 
and brooks. The salt makers spent much time 
and money “purifying” their water from this sub- 
stance, never apparently suspecting that the really 
valuable product of their wells was not the salt 
water they so carefully preserved, but the petro- 
leum which they threw away. Samuel M. Kier was 


28 THE AGE OF BIG BUSINESS 


originally a salt manufacturer; more canny than his 
competitors, he sold the oil which came up with his 
water as a patent medicine. In order to give a mys- 
terious virtue to this remedy, Kier printed on his 
labels the information that it had been “pumped 
up with salt water about four hundred feet below 
the earth’s surface.”’ His labels also contained the 
convincing picture of an artesian well — a rough 
woodcut which really laid the foundation of the 
Standard Oil Company. 

In the late fifties Mr. George H. Bissell had be- 
come interested in rock oil, not as an embrocation 
and as a cure for most human ills, but as a light- 
giving material. A professor at Dartmouth had 
performed certain experiments with this substance 
which had sunk deeply into Bissell’s imagination. 
So convinced was this young man that he could 
introduce petroleum commercially that he leased 
certain fields in western Pennsylvania and sent a 
specimen of the oil to Benjamin Silliman, Jr., Pro- 
fessor of Chemistry at Yale. Professor Silliman 
gave the product a more complete analysis than it 
had ever previously received and submitted a re- 
port which is still the great classic in the scientific 
literature of petroleum. This report informed Bis- 
sell that the substance could be refined cheaply and 


- 


THE FIRST GREAT AMERICAN TRUST 29 


easily, and that, when refined, it made a splendid 
illuminant, besides yielding certain by-products, 
such as paraffin and naphtha, which had a great 
commercial value. So far, Bissell’s enterprise 
seemed to promise success, yet the great problem 
still remained: how could he obtain this rock oil 
in amounts large enough to make his enterprise a 
practical one? A chance glimpse of Kier’s label, 
with its picture of an artesian well, supplied Bissell 
with his answer. He at once sent E. L. Drake into 
the oil-fields with a complete drilling equipment, to 
look, not for salt water, but for oil. Nothing seems 
quite so obvious today as drilling a well into the 
rock to discover oil, yet so strange was the idea in 
Drake’s time that the people of Titusville, where 
he started work, regarded him as a lunatic and 
manifested a hostility to his enterprise that de- 
layed operations for several months. Yet one day 
in August, 1859, the coveted liquid began flowing 
from “Drake’s folly”’ at the rate of twenty-five 
barrels a day. 
Because of this performance Drake has gone 
down to fame as the man who “discovered oil.** 
the sense that his operation made petroleum 


_ available to the uses of mankind, Drake was its 


discoverer, and his achievement seems really a 


30 THE AGE OF BIG BUSINESS 


greater one than that of the men who first made 
apparent our beds of coal, iron, copper, or even 
gold. For Drake really uncovered an entirely new 
substance. And the country responded spontane- 
ously to Drake’s success. For anything approach- 
ing the sudden rush to the oil-fields we shall have to 
go to the discovery of gold in California ten years 
before. Men flocked into western Pennsylvania by 
the thousands; fortunes were made and lost almost 
instantaneously. Oil flowed so plentifully in this 
region that it frequently ran upon the ground, and 
the “‘gusher,”’ which threw a stream of the pre- 
cious liquid sometimes a hundred feet and more in- 
to the air, became an almost every-day occurrence. 
The discovery took the whole section by sur- 
prise; there were no towns, no railways, and no 
wagon roads except a few almost impassable lum- 
ber trails. Yet, almost in a twinkling, the whole 
situation changed; towns sprang up overnight, 
roads were built, over which teamsters could carry 
the oil to the nearest shipping points, and the great 
trunk lines began to extend branches into the re- 
gions. The one thing, next to Drake’s well, that 
made the oil available, was the discovery, which 
was made by Samuel Van Syckel, that a two-inch 
pipe, starting at the well, could convey the oil for 


THE FIRST GREAT AMERICAN TRUST 31 


several miles to the nearest railway station. Ina 
few years the whole oil region of Venango County 
was an inextricable tangle of these primitive pipe 
lines. 

Thus, before the Civil War had ended, the west- 
ern Pennsylvania wilderness had been transformed 
into the busy headquarters of a new industry. 
Companies had been formed, many of them the 
wildest stock-jobbing operations, refineries had 
been started, in a few years the whalers of New 
England had almost lost their occupation, but mil- 
lions of American homes, that had hitherto had to 
spend the long winter evenings almost in darkness, 
suddenly found themselves flooded with light. In 
Cleveland, in Pittsburgh, in Philadelphia, in New 
York, and in the oil regions, the business of refin- 
ing and selling petroleum had reached extensive 
proportions. Europe, although it had great un- 
developed oil-fields of its own, drew upon this new 
American enterprise to such an extent that, eleven 
years after Drake’s “discovery,’’ petroleum had 
taken fourth place among our exported articles. 

The very year that Bissell had organized his pe- 
troleum company a boy of sixteen had obtained his 
first job in a produce commission office on a dock in 
Cleveland. As the curtain rises on the career of 


32 THE AGE OF BIG BUSINESS 


John D. Rockefeller, we see him perched upon a 
high stool, adding up figures and casting accounts, 
faithfully doing every odd office job that came his 
way, earning his employer’s respect for his indus- 
try, his sobriety, and his unmistakable talents for 
business. Nor does this picture inadequately visu- 
alize Rockefeller’s whole after-life, and explain the 
business qualities that made possible his unexam- 
pled success. It is, indeed, the scene to which Mr. 
Rockefeller himself most frequently reverts when, 
in his famous autobiographical discourses to his 
Cleveland Sunday School, he calls our attention 
to the rules that inevitably lead to industrial pros- 
perity. “Thrift, thrift, Horatio,” is the one idea 
upon which the great captain of the oil business 
has always insisted. Many have detected in these 
habits of mind only the cheese-paring activities 
of a naturally narrow spirit. Rockefeller’s old 
Cleveland associates remember him as the greatest 
bargainer they had ever known, as a man who had 
an eye for infinite details and an unquenchable 
patience and resource in making economies. Yet 
Rockefeller was clearly more than a pertinacious 
haggler over trifles. Certainly such a diagnosis 
does not explain a man who has built up one of the 
world’s greatest organizations and accumulated 


THE FIRST GREAT AMERICAN TRUST 33 


the largest fortune which has ever been placed at 
the disposal of one man. Indeed, Rockefeller dis- 
played unusual business ability even before he 
entered the oil business. A young man who, at 
the age of nineteen, could start a commission 
house and do a business of nearly five hundred 
thousand the first year must have had commer- 
cial capacity to an extraordinary degree. 

Fate had placed Rockefeller in Cleveland in the 
days when the oil business had got well under way. 
In the early sixties a score or so of refineries had 
started in this town, many of which were making 
large profits. It is not surprising that Rockefeller, 
gazing at these black and evil-smelling buildings 
from the vantage point of his commission office, 
should have felt an impulse to join in the gamble. 
He plunged into this new activity at the age of 
twenty-three. He possessed two great advantages. 
over most of his adventurous competitors; one was: 
a heavy bank account, representing his earnings in 
the commission business, and the other a partner, 
Samuel Andrews, who was generally regarded as a 
mechanical genius in the production of illuminating 
oil. At the beginning, therefore, Rockefeller had 
the two essentials which largely explain his sub-. 
sequent career; an adequate liquid capital and 


3 


34 THE AGE OF BIG BUSINESS 


high technical resources. In the first few years the 
Rockefeller houses — he rapidly organized three, 
one after another — competed with a large num- 
ber of other units in the oil business on somewhat 
more than even terms. At this time Rockefeller 
was merely one of a large number of successful oil 
refiners, yet during these early days a grandiose 
scheme was taking shape in that quiet, insinuating, 
far-reaching brain. He said nothing about it, even 
to his closest associates, yet it filled his every wak- 
ing hour. For this young man was taking a com- 
prehensive sweep of the world and he saw millions 
of people, in the Americas, in Europe, and in 
Asia, whose need for the article in which he dealt 
would grow more insistent every day. He saw 
that he was handling a product which was becom- 
ing as much a necessity of life as the air itself. 
The young man reached out to grasp this business. 
‘All of it,’’ we can picture Rockefeller saying to 
himself, ‘‘all of it shall be mine.” 
Rockefeller’s career must lead to the conclusion 
that, before he had reached his thirtieth year, he 
had determined to monopolize this growing neces- 
sity. The mere fact that this young man could 
form such a stupendous plan indicates that in 
him we are meeting for the first time a new type 


Any study of 


THE FIRS? GREAT AMERICAN TRUST 35 


of industrial leader. At that time monopolies 
were unknown in the United States. That certain 
old English Kings had frequently granted exclu- 
sive trading privileges to favored merchants most 
educated Americans knew; and their knowledge of 
monopolies extended little further than this. Yet 
about 1868 John D. Rockefeller started consciously 
to. revive this ancient practice, and to bring under 
one ownership the magnificent industry to which 
Drake’s sensational discovery had given rise. 
Daring as was this conception, the resourceful-\ 
ness and the skill with which Rockefeller executed 
it were more startling still. Merely to catalogue, | 
one by one, the achievements of the ten succeed- 
ing fruitful years, almost takes one’s breath away. 
Indeed the whole operation proceeded with such 
a Napoleonic rapidity of action that the outside 
world had hardly grasped Rockefeller’s intention 
before the monopoly had been made complete. We 
catch one glimpse of Rockefeller, in 1868, as head of 
the prosperous house of Rockefeller, Andrews, and 
Flagler, and eight years afterwards we see him once 
more, this time the man who controlled practically 
the entire petroleum business of the world. His 
career of conquest began in 1870, when the firm 
of Rockefeller, Andrews, and Flagler, joining hands 


f 


36 THE AGE OF BIG BUSINESS 


with several large capitalists in Clevelznd and New 
York, was incorporated under the namé:of the 
Standard Oil Company of Ohio. In 1870 about 
twenty-five independent refineries, many of them 
prosperous and powerful, were manufacturing oil 
in the city of Cleveland; two years afterward this 
new Standard Oil Company had absorbed all of 
them except five. In these two critical years the oil 
business of the largest refining center in the United 
States had thus passed into Rockefeller’s hands. 
By 1874 the greatest refineries in New York and 
Philadelphia had likewise merged their identity 
with his own. When Rockefeller began his acquisi- 
tion, there were thirty independent refineries op- 
erating in Pittsburgh, all of which, in four or five 
years, passed one by one under his control. The 
largest refineries of Baltimore surrendered in 1875. 

These capitulations left only one important refin- 
ing headquarters in the United States which the 
Standard had not absorbed. This was that section 
of western Pennsylvania where the oil business had 
had its origin. The mere fact that this area was 
the headquarters of the oil supply gave it great © 
advantages as a place for manufacturing the fin- 
ished product. The oil regions regarded these ad- 
vantages as giving them the right to dominate the 


fae 


4E FIRST GREAT AMERICAN TRUST 37 
growiig industry, and they had frequently pro- 


» 


| claimed the doctrine that the business belonged te 


them. They hated Rockefeller as much as they 
feared him, yet at the very moment when the Ti- 
tusville operators were hanging him in effigy and 
posting the hoardings with cabalistic signs against 
his corporation, this mysterious, almost uncanny 
power was encircling them. Men who one night 
were addressing public meetings denouncing the 
Standard influence would suddenly sell out their 
holdings the next day. In 1875 John D. Archbold, 
a brilliant young refiner who had grown up in the 
oil regions and who had gained much local fame as 
opponent of the Standard, appeared in Titusville as 


' the President of the Acme Oil Company. At that 


time there were twenty-seven independent refiner- 


‘ies in this section. Archbold began buying and 


leasing these establishments for his Acme Com- 
pany, and in about four years practically every 
one had passed under his control. The Acme Com- 
pany was merely a subsidiary of the Standard Oil. 

These rapid purchasing campaigns gave the 
Standard ninety per cent of all the refineries in the 
United States, but Rockefeller’s scheme compre- 
hended more than the acquisition of refineries. In 
the main the Rockefeller group left the production 


38 THE AGE OF BIG BUSINESS’ 


of crude oil in the hands of the private drillers, but 
practically every other branch of the business 
passed ultimately into their hands. Both the New 
York Central and the Erie railroads surrendered 
to the Standard the large oil terminal stations 
which they had maintained for years in New York. 
As a consequence, the Standard obtained complete 
supervision of all oil sent by railroad into New 
York, and it also secured the machinery of a com- 
plete espionage system over the business of com- 
petitors. The Standard acquired companies which 
had built up a large business in marketing oil. 
Even more dramatic was its success in gathering 
up, one after another, these pipe lines which repre- 
sented the circulatory system of the oil industry. 
In the early days these pipe lines were small and 
comparatively simple affairs. They merely carried 
the crude oil from the wells to railroad centers; 
from these stations the railroads transported it to 
the refineries at Cleveland, New York, and other 
places. At an early day the construction and man- 
agement of these pipe lines became a separate in- 
dustry. And now, in 1873, the Standard Oil Com- 
pany secured possession of a one-third interest in 
the largest of these privately owned companies, the 
American Transfer Company. Soon afterward the 


THE FIRST GREAT AMERICAN TRUST 39 


United Pipe Line Company went under their con- 
trol. In 1877 the Empire Transportation Com- 
pany, a large pipe line and refining corporation 
which the Pennsylvania Railroad had controlled 
for many years, became a Standard subsidiary. 
Meanwhile certain hardy spirits in the oil regions 
had conceived a much more ambitious plan. Why 
not build great underground mains directly from 
the oil regions to the seaboard, pump the crude oil 
directly to the city refineries, and thus free them- 
selves from dependence on the railroads? At first 
the idea of pumping oil through pipes over the Alle- 
ghany Mountains seemed grotesque, but competent 
engineers gave their indorsement to the plan. A 
certain “Dr.’’ Hostetter built for the Columbia 
Conduit Company a trunk pipe line that extended 
thirty miles from the oil regions to Pittsburgh. 
Hardly had Hostetter completed his splendid pro- 
ject when the Standard Oil capitalists quietly 
appeared and purchased it! For four years an- 
other group struggled with an even more ambitious 
scheme, the construction of a conduit, five hundred 
miles long, from the oil regions to Baltimore. The 
American people looked on admiringly at the splen- 
did enterprise whose projectors, led by General 
Haupt, the builder of the Hoosac Tunnel, struggled 


40 THE AGE OF BIG BUSINESS 


against bankruptcy, strikes, railroad opposition, 
and hostile legislatures, in their attempts to push 
their pipe line to the sea. In 1879 the Tidewater 
Company first began to pump their oil, and the 
American press hailed their achievement as some- 
thing that ranked with the laying of the Atlantic 
Cable and the construction of the Brooklyn Bridge. 
But in less than two years the Rockefeller interest 
had entered into agreements with the Tidewater 
Company that practically placed this great sea- 
board pipe line in its hands. 

Thus in less than ten years Rockefeller had 
realized his ambitious dream; he now controlled 
practically everything concerned in the manufac- 
ture and sale of petroleum. The change had come 
about so stealthily, so secretly, and even so re- 
morselessly that it impressed the public almost as 
the work of some uncanny genius. What were the 
forces, personal and economic, that had produced 
this new phenomenon in our business life? In cer- 
tain particulars the Standard Oil monopoly was the 
product of well-understood principles. From his 
earliest days John D. Rockefeller had struggled to 
eliminate the middleman. He established factories 
to build his own barrels, to make his own acids; he 
created his own selling firms, and, instead of paying 


THE FIRST GREAT AMERICAN TRUST 41 


large storage charges, he constructed his own ware- 
houses in New York. From his earliest days as a 
refiner, he had adopted the principle of paying no 
man a profit, and of performing all the intermediate 
acts that had formerly resulted in large tribute 
to middlemen. Moreover, the Standard Oil Com- 
pany was apparently the first great American in- 
dustrial enterprise that realized the necessity of 
operating with an abundant capital. Not the least 
of Mr. Rockefeller’s achievements was his success 
in associating with the new company men having 
great financial standing — Amasa Stone, Benjamin 
Brewster, Oliver Jennings, and the like, capitalists 
whose banking resources, placed at the disposi- 
tion of the Standard, gave it an immense advan- 
tage over its rivals. While his competitors were 
“kiting ” checks and waiting, hat in hand, on the 
good nature of the money lenders, Rockefeller al- 
ways had a large bank balance, upon which he 
could instantly draw for his operations. 

Nor must we overlook the fact that the Standard 
group contained a large number of exceedingly able 
men. “‘They are mighty smart men,” said the de- 
spairing W. H. Vanderbilt, in 1879, when pressed 
to give his reasons for granting rebates to the 
Rockefeller group. “I guess if you ever had to deal 


42 THE AGE OF BIG BUSINESS 


with them you would find that out.” In Rocke- 
feller the corporation possessed a man of tireless 
industry and unshakable determination. Nothing 
could turn him aside from the work to which he had 
puthishand. Public criticism and even denuncia- 
tion, while he resented it as unjust and regarded it 
as the product of a general misunderstanding, never 
caused the leader of Standard Oil even momenta- 
rily to flinch. He was a man of one idea, and he 
worked at it day and night, taking no rest or recrea- 
tion, skillfully turning to his purpose every little 
advantage that came his way. His associates — 
men like Flagler, Archbold, and Rogers — also had 
unusual talents, and together they built up the 
splendid organization that still exists. They ex- 
acted from their subordinates the last ounce of at- 
tention and energy and they rewarded generously 
everybody who served them well. They showed 
great judgment in establishing refineries at the 
most strategic points and in giving up localities, 
such as Boston and Portland, which were too far 
removed from their supplies. They established a 
marketing system which enabled them to bring 
their oil directly from their own refineries to the re- 
tailer, all in their own tank cars and tank wagons. 
They extended their markets in foreign countries, 


THE FIRST GREAT AMERICAN TRUST 43 


so that now the Standard sells the larger part of its 
products outside the United States. They estab- 
| lished chemical research laboratories which devised 
| new and inexpensive methods for refining the pro- 
duct and developed invaluable by-products, such 

as paraffin, naphtha, vaseline, and lubricating oils. 
_ It is impossible to study the career of the Standard 
Oil Company without concluding that we have 
here an example of a supreme business intelligence 
working in a field which gave the widest possible 
scope of action. 

A high quality of organization, however, does not 
completely explain the growth of this monopoly. 
‘The Standard Oil Company was the beneficiary of 
methods that have deservedly received great public 
opprobrium. Of these the one that stands forth 
most conspicuously is the railroad rebate. Those 
who have attempted to trace the very origin of the 
Rockefeller preéminence to railroad discrimination 
have not entirely succeeded. Only the most hazy 
evidence exists that the firm of Rockefeller, An- 
drews, and Flagler greatly profited from rebates. 
Tn fact, refined oil was not transported from Cleve- 
land to the seaboard by railroad until 1870, the 
year that this firm dissolved; practically all of the 
product then went by way of the Great Lakes and 


44 THE AGE OF BIG BUSINESS 


the Erie Canal. Possibly the Rockefeller firm did 
get occasional rebates on crude oil from the oil 
regions to the refineries, but so did their competi- 
tors. Itis therefore not likely that such favors had 
great influence in making this single firm the most 
successful in the largest refining center. With the 
organization of the Standard Oil Company, how- 
ever, rebates became a more important consider- 
ation. 

The turning-point in the history of the oil indus- 
try came when the Rockefeller interests acquired 
the Cleveland refineries. The details concerning 
this act of generalship are fairly well known. The 
South Improvement Company is a corporation 
that necessarily bulks large in the history of the 
Standard Oil. Mr. Rockefeller and his associates 
have always disclaimed the parentage of this or- 
ganization. They assert — and their assertion is 
doubtless true — that the only responsible beget- 
ters were Thomas A. Scott, President of the Penn- 
sylvania Railroad, and certain refineries in Pitts- 
burgh and Philadelphia which, though they were 
afterwards absorbed by the Standard, were at that 
time their competitors. These refiners and the 
Pennsylvania, over which the Standard Oil then 
was making no shipments, thus represented a group, 


THE FIRST GREAT AMERICAN TRUST 45 


composed of railroads and refiners, which was an- 
tagonistic to the Rockefeller interests. The South 
Improvement Company was an association of re- 
finers with which the railroads, chiefly the Pennsy]- 
vania, the New York Central, and the Erie, made 
exclusive contracts for shipping oil. Under these 
contracts rates to the seaboard weré to be gener- 
ally raised, though the members of the South Im- 
provement Company were to receive liberal re- 
bates. The refiners of Cleveland and Pittsburgh 
were to get lower rates than the refiners located 
in the oil regions. But the clause in these con- 
tracts that caused the greatest amazement and 
indignation was one which gave the inside group 
rebates on every barrel of oil shipped by its 
competitors. 

It would be difficult to imagine any transaction 
more wicked than these contracts. Carried into 
execution they inevitably meant the extinction of 
every refiner who had not been admitted into the 
inside ring. Of the two thousand shares of the 
South Improvement Company, the gentlemen who 
were at that time most conspicuously identified 
with the Standard Oil Company subscribed to five 
hundred and forty. Mr. Rockefeller has always 
protested that he did not favor the scheme and that 


46 THE AGE OF BIG BUSINESS 


he became a party to it simply because he could not 
afford to antagonize the powerful Pennsylvania 
Railroad, which had originated it. When the de- 
tails became public property, a wave of indignation 
swept from the Atlantic to the Pacific; the oil 
regions, which would have been the heaviest suffer- 
ers, shut down their wells and so cut off the supply 
of crude oil; the New York newspapers started a 
“crusade” against the South Improvement group 
and Congress ordered an investigation. So fiercely 
was the public wrath aroused that the railroads ran 
to cover, abrogated the contracts, signed an agree- 
ment promising never more to grant rebates to any 
one, while the Pennsylvania Legislature repealed 
the charter of the South Improvement Company. 
This particular scheme, therefore, never came to 
maturity. 

Before the South Improvement Company ended 
its corporate existence, however, a great change 
had taken place in the oil situation. Practically all 
the refineries in Cleveland had passed into the con- 
trol of the Standard Oil Company. The Standard 
has always denied that there was any connection 
between the purchase of these great refineries and 
the organization of the South Improvement Com- 
pany. But there is much evidence sustaining a 


THE FIRST GREAT AMERICAN TRUST 47 


contrary view, for many of these refiners afterward 
went on the witness stand and told circumstantial 
stories, all of which made precisely the same point. 
This was that the Standard men had come to them, 
shown the contracts which had been made by the 
South Improvement Company, and argued that, 
under these new conditions, the refineries left out- 
side the combination could not long survive. The 
Standard’s rivals were therefore urged to “‘come 
in,” to take Standard stock in return for their 
refineries, or, if they preferred, to sell outright. 
Practically all saw the force in this argument and 
sold — in most cases taking cash. 

The acquisition of these Cleveland refineries 
made inevitable the Rockefeller conquest of the oil 
industry. Up to that time the Standard had re- 
fined about fifteen hundred barrels a day, and now 
suddenly its capacity jumped to more than twelve 
thousand barrels. This one strategic move had 
made Rockefeller master of about one-third of all 
the oil business in the United States, and this fact 
explains the rapidity with which the other citadels 
fell. There is no evidence that the Standard exer- 
cised any pressure upon the great refineries in New 
York, Pittsburgh, and Philadelphia. Indeed these 
concerns manifested an eagerness to join. The 


48 THE AGE OF BIG BUSINESS 


fact that, unlike the Cleveland refiners, many of 
the firms in these other cities took Standard stock, 
and so became parts of the new organization, is 
in itself significant. They evidently realized that 
they were casting their fortunes with the winning 
side. The huge shipments which the Standard now 
controlled explain this change in front. Every day 
Mr. Rockefeller could send from Cleveland to the 
seaboard a train, sixty cars long, loaded with 
the blue barrels containing his celebrated liquid. 
That was a consideration for which any railroad 
would at that time sell its soul. And the New 
York Central road promptly made this sacrifice. 
Hardly had the ink dried on its written promise 
not to grant any rebates when it began granting 
them to the Standard Oil Company. 

In those days the railroad rate was not the sa- 
cred, immutable thing which it subsequently be- 
came, although the argument for equal treatment 
of shippers existed theoretically just as strongly 
forty years ago as it does today. The rebate 
was just as illegal then as it is at present; there 
was no precise statute, it is true, which made it 
unlawful until the Interstate Commerce Act was 
passed in 1887; but the common law had always 
prohibited such discriminations. In the seventies 


THE FIRST GREAT AMERICAN TRUST 49 


and eighties, however, railroad men like Cornelius 
Vanderbilt and Thomas A. Scott were less inter- 
ested in legal formalities than in getting freight. 
They regarded transportation as a commodity to 
be bought and sold, like so much sugar or wheat or 
coal, and they believed that the ordinary principles 
which regulated private bargaining should also 
regulate the sale of the article in which they dealt. 
According tethis reasoning, which was utterly false 
and iniquitous, but generally prevalent at the time, 
the man who shipped the largest quantities of oil 
should get the lowest rate. 

The purchase of the Cleveland refineries made 
the Standard Oil group the largest shippers and 
therefore they obtained the most advantageous 
terms for transporting their product. Under these 
conditions they naturally obtained the monopoly, 
the extent of which has been already described. 
Their competitors could rage, hold public meetings, 
start riots, threaten to lynch Mr. Rockefeller and 
all his associates, but they could not long survive 
in face of these advantages. The only way in which 
the smaller shippers could overcome this handicap 
was by acquiring new methods of transportation. 
Tt was this necessity that inspired the construction 
of pipe lines; but the Standard, as already de- 


4 


50 THE AGE OF BIG BUSINESS 


scribed, succeeded in absorbing these just about 
as rapidly as they were constructed. 


Not only did the Standard obtain railroad re- 
bates but it developed the most death-dealing 


methods in its system of marketing its oil. In these 


campaigns it certainly overstepped the boundaries” 


of legitimate business, even according to the pre- 
vailing morals of its own or of any other time. 
While it probably did not set fire to rival refineries, 
as it has sometimes been accused of doing, it un- 
doubtedly did resort to somewhat Prussian meth- 
ods of destroying the foe. This great corpora- 
tion divided the United States into several sections, 
over each of which it appointed an agent, who in 
turn subdivided his territory into smaller divisions, 
each one of which likewise had its captain. The 
order imperatively issued to each agent was, “‘Sell 
all the oil that is sold in your district.” To these 


instructions he was rigidly held; success in accom- 


plishing his task meant advancement and an in- 
creased salary, with a liberal pension in his old age, 
whereas failure meant a pitiless dismissal. He was 
expected to supervise not only his own business, 
but that of his rivals as well, to obtain access 
to their accounts, their shipments, and their 
customers. It has been asserted, and the assertion 


THE FIRST GREAT AMERICAN TRUST 51 


has been supported by considerable evidence, that 
these agents did not hesitate to bribe railroad em- 
ployees and in this way get access to their competi- 
tors’ bills of lading and records of their shipments, 
and that they would even bribe dealers to cancel 
such orders and take the oil from them at a lower 
price. This information laid the foundation for 
those price-cutting campaigns that have brought 
the name of the Standard Oil into such disfavor. 
And when the Standard cut, it cut to kill; the only 
purpose was to drive the competitor from the field, 
and, when this had been accomplished, the price 
of oil would promptly go up again. The organiza- 
tion of “bogus companies,” started purely for the 
urpose of eliminating competitors, seems to have 
beén a not infrequent practice. This latter method 
emphasizes another quality that accompanied the 
Standard’s operations and so largely explains its 
unpopularity — the secrecy with which it so com- 
monly worked. Though the independent oil re- 
finers were combating the most powerful financial 
power of the time, they were frequently fighting in 
the dark, never knowing where to deliver their 
blows. 
This same characteristic was manifested in the 
form of corporate existence which the Standard 


52 THE AGE OF BIG BUSINESS 


adopted. The first great “trust” was a trust not 
only in name but in fact. The Standard introduc 
not only a new economic development into our na- 


tional organization; it introduced a new word into 
our language and an issue into American politics 
that provided sustenance for the presidential cam- 
paigns of twenty-five years. From the beginning 
the Standard Oil had always been a close corpora- 
tion. Originally it had had only ten stockhold- 
ers, and this number had gradually grown until, 
in 1881, there were forty-one. These men ha 
adopted a new and secretive method of combinin, 


their increasing possessions into a single ownership 
In 1873 the Standard Company had increased it 
capital stock (originally $1,000,000) to $3,500,000. 
the new certificates being exchanged for interest 
in the great New York and Philadelphia refineries 
The Standard Oil Company of Ohio never had 
larger capital stock than that. As additional prop 
erties were acquired, the interests were placed i 
the hands of trustees, who held them for the joint 
benefit of the stockholders in the original company. 
In 1882 this idea was carried further, for then the 
Standard Oil Trust was organized. The fact tha 
the properties lay in so many different States, many 
of which had laws intended to curb corporations 


THE FIRST GREAT AMERICAN TRUST 53 


was evidently what led to this form of consolida- 
tion. A trust was formed, consisting of nine trus- 
tees, who held, for the benefit of the Standard Oil 
stockholders, all the stock in the Standard and in 
the subsidiary companies. Instead of certificates 
of stock the trustees issued certificates of trust 
amounting to $70,000,000. Each Standard stock- 
holder received twenty of these certificates for each 
share which he held of Standard stock. These 
certificates could be bought and sold and passed 
on by inheritance precisely the same as stocks. 
Ingenious as was this legal device, it did not 
stand the test of the courts. In 1892 the Ohio 
Supreme Court declared the Standard Oil Trust a 
violation of the Jaw and demanded its dissolution. 
The persistent attempts of the Standard to disre- 
gard this order increased its reputation for law- 
lessness. Finally, in 1899, after Ohio had brought 
another action, the trust was dissolved. The 
Standard interests now reorganized all their hold- 
ings under the name of the Standard Oil Company 
of New Jersey. Again, in 1911, the United States 
Supreme Court declared this combination a viola- 
tion of the Sherman Anti-Trust Act, and ordered its 
dissolution. By this time the Standard capitalists 
had learned the value of public opinion as a corpo- 


54 THE AGE OF BIG BUSINESS 


rate asset, and made no attempt to evade the order 
of the court. The Standard Oil Company of New 
Jersey proceeded to apportion among its stock- 
holders the stock which it held in thirty-seven other 
companies — refineries, pipe lines, producing com- 
panies, marketing companies, and the like. Chief 
Justice White, in rendering his decision, specifically 
ordered that, in dissolving their combination, the 
Standard should make no agreement, contractual 
or implied, which was intended still to retain their 
properties in one ownership. As less than a dozen 
men owned a majority interest in the Standard Oil 
Company of New Jersey, these same men naturally 
continued to own a majority interest in the sub- 
sidiary companies. Though the immediate effect 
of this famous decision therefore was not to cause 
a separation in fact, this does not signify that, as 
time goes on, such a real dissolution will not take 
place. It is not unlikely that, in a few years, the 
transfers of the stock by inheritance or sale will 
weaken the consolidated interest to a point where 
the companies that made up the Standard Com- 
pany will be distinct and competitive. 

This is more likely to be the case since, long before 
the decision of 1911, the Standard Oil Company 
had ceased to be a monopoly. In the early nine- 


THE FIRST GREAT AMERICAN TRUST 55 


ties there came to the front in the oil regions 
a man whose organizing ability and indomitable 
will suggested the Standard Oil leaders themselves. 
This man’s soul burned with an intense hatred of 
the Rockefeller group, and this sentiment, as much 
as his love of success, inspired all his efforts. There 
is nothing finer in American business history than 
the fifteen years’ battle which Lewis Emery, Jr., 
fought against the greatest financial power of the 
day. In 1901 this long struggle met with com- 
plete success. Its monuments were the two great 
trunk pipe lines which Emery had built from 
the Pennsylvania regions to Marcus Hook, near 
Philadelphia, one for pumping refined and one for 
pumping crude. The Pure Oil Company, Emery’s 
ereation, has survived all its trials and has done 
an excellent business. And meanwhile other inde- 
pendents sprang up with the discovery of oil in 
other parts of the country. This discovery first 
astonished the Standard Oil men themselves; when 
someone suggested to Archbold, thirty-five years 
ago, that the mid-continent field probably con. 
tained large oil supplies, he laughed, and said that 
he would drink all the oil ever discovered outside 
of Pennsylvania. In these days a haunting fear 
pursued the oil men that the Pennsylvania field 


56 THE AGE OF BIG BUSINESS 


would be exhausted and that their business would 
beended. This fear, as developments showed, had 
a substantial basis; the Pennsylvania yield began to 


fail in the eighties and nineties, until now it is an 
inconsiderable element in this gigantic industry. 
Ohio, Indiana, Illinois, Kansas, Oklahoma, Texas, 
California, and other States in turn became the 
scene of the same exciting and adventurous events 
that had followed the discovery of oil in Pennsyl- 
vania. The Standard promptly extended its pipe 
lines into these new areas, but other great com- 
panies also took part in the development. These 
companies, such as the Gulf Refining Company 
and the Texas Refining Company, have their gath- 
ering pipe lines, their great trunk lines, their mar- 
keting stations, and their export trade, like the 
Standard; the Pure Oil Company has its tank cars, 
its tank ships, and its barges on the great rivers of 
Europe. The ending of the rebate system has 
stimulated the growth of independents, and the 
production of crude oil and the market demand in a 
thousand directions has increased the business to 
an extent which is now far beyond the ability of 
any one corporation to monopolize. The Standard 
interests refine perhaps something more than fifty 
per cent of the crude oil produced in this country. 


| 
~ THE FIRST GREAT AMERICAN TRUST 57 


tiated 


But in recent years, Standard Oil has meant more 
than a corporation dealing in this natural product. 
Tt has become the synonym of a vast financial power 
reaching in all directions. The enormous profits | 
made by the Rockefeller group have found invest- — ji 
ments in other fields. The Rockefellers became 
the owners of the great Mesaba iron ore range 
in Minnesota and of the Colorado Fuel and Iron 
Company, the chief competitor of United States 
Steel. It is the largest factor in several of the 
greatest American banks. Above all, it is the single 
largest railroad power in America today. 0 


CHAPTER III 


THE EPIC OF STEEL 


Ir was the boast of a Roman Emperor that he had 
found the Eternal City brick and left it marble 
Similarly the present generation of Americans in 
herited a country which was wood and have trans- 
formed it into steel. That which chiefly distin 
guishes the physical America of today from tha 
of forty years ago is the extensive use of this 
metal. Our fathers used steel very little in railway 
transportation; rails and locomotives were usually 
made of iron, and wood was the prevailing material 
for railroad bridges. Steel cars, both for passen- 
gers and for freight, are now everywhere taking the 
place of the more flimsy substance. We travel 
today in steel subways, transact our business in 
steel buildings, and live in apartments and private 
houses which are made largely of steel. The steel 
automobile has long since supplanted the woodem 


carriage; the steel ship has displaced the a 
58 


THE EPIC OF STEEL 59 


d wooden vessel. The American farmer now 
closes his lands with steel wire, the Southern 
lanter binds his cotton with steel ties, and modern 
erica could never gather her abundant harvests 
ithout her mighty agricultural implements, all 
f which are made of steel. Thus it is steel that 
elters us, that transports us, that feeds us, and 
that even clothes us. 

This substance is such a commonplace element 
in our lives that we take it for granted, like air and 
water and the soil itself; yet the generation that 
fought the Civil War knew practically nothing of 
steel. They were familiar with this metal only as 
a curiosity or as a material used for the finer kinds 
of cutlery. How many Americans realize that steel 
was used even less in 1865 than aluminum is used 
today? Nearly all the men who have made the 
American Steel Age—such as Carnegie, Phipps, 
Frick, and Schwab — are still living and some of 
them are even now extremely active. Thirty-five 
years ago steel manufacture was regarded, even in 
this country, as an almost exclusively British in- 
dustry. In 1870 the American steel maker was 
the parvenu of the trade. American railroads pur- 
chased their first steel rails in England, and the 
early American steel makers went to Sheffield for 


60 THE AGE OF BIG BUSINESS ) 


their expert workmen. Yet, in little more than ten 
years, American mills were selling agricultural ma- 
chinery in that same English town, American rails 
were displacing the English product in all a 


| 


of the world, American locomotives were draw- 
ing English trains on English railways, and Amer- 
ican steel bridges were spanning the Ganges | 
the Nile. Indeed, the United States soon sur- 
passed England. In the year before the World 
War the United Kingdom produced 7,500,000 tons 
of steel a year, while the United States produced 
32,000,000 tons. Since the outbreak of the Great 
War, the United States has probably made more 
steel than all the rest of the world put together. 
“The nation that makes the cheapest steel,” says 
Mr. Carnegie, “‘has the other nations at its feet.” 
When some future Buckle analyzes the funda- 


mental facts in the World War, he may possibly 
find that steel precipitated it and that steel de- 
termined its outcome. 

Three circumstances contributed to the rise of 
this greatest of American industries: a new process 
for cheaply converting molten pig iron into steel, 
the discovery of enormous deposits of ore in several 
sections of the United States, and the entrance into 
the business of a hardy and adventurous group of 


THE EPIC OF STEEL 61 


manufacturers and business men. Our steel in- 
dustry is thus another triumph of American inven- 
tive skill, made possible by the richness of our min- 


eral resources and the racial energy of our people. 
An elementary scientific discovery introduced the 
great steel age. Steel, of course, is merely iron 
which has been refined — freed from certain im- 
purities, such as carbon, sulphur, and phosphorus. 
We refine our iron and turn it into steel precisely 
as we refine our sugar and petroleum. From the 
days of Tubal Cain the iron worker had known that 
heat would accomplish this purification; but heat, 
up to almost 1865, was an exceedingly expensive 
commodity. For ages iron workers had obtained 
the finer metal by applying this heat in the form 
of charcoal, never once realizing that unlimited 
quantities of another fuel existed on every hand. 
The man who first suggested that so commonplace 
a substance as air, blown upon molten pig iron, 
would produce the intensest heat and destroy its 
impurities, made possible our steel railroads, our 
steel ships, and our steel cities. When William 
Kelly, an owner of iron works near Eddyville, Ken- 
tucky, first proposed this methed in 1847, he met 
with the ridicule which usually greets the pioneer 
inventor. When Henry Bessemer, several years 


62 THE AGE OF BIG BUSINESS 


afterward, read a paper before the British Associaz ‘ 
tion for the Advancement of Science, in which he 


paveeaes the same principle, he was roared dowel 
as “‘a crazy Frenchman,” and the savants were SO 
humiliated by the suggestion that they voted to. 
make no record of his “‘silly paper” in their official 
minutes. Yet these two men, the American Kelly | 
and the Englishman Bessemer, were the creators of { 
modern steel. The records of the American Patent F 
Office clearly show that Kelly made “Bessemer” 
steel many years before Bessemer. In 1870 thell 
American Government refused to extend Besse-— 
mer’s patent in this country on the ground that 
William Kelly had a prior claim; in spite of this, 


Bessemer was undoubtedly the man who developed - 
the mechanical details and gave the process a uni- 
versal standing. 

Though the Bessemer process made possible the 


a 


production of steel by tons instead of by pounds, it~ 
would never in itself have given the nation its pres- 
ent préeminence in the steel industry. Iron had 
been mined in the United States for two centuries 

on a small scale, the main deposits being located in ~ 
the Lake Champlain region of New York and in : 
western Pennsylvania. But these, and a hundred 


other places located along the Atlantic coast, could | 


THE EPIC OF STEEL 63 


uot have produced ore in quantities sufficient to 
satisfy the yawning jaws of the Bessemer convert- 
lers. As this new method poured out the liquid in 
thousands of tons, and as the commercial demand 
lextended in a dozen different directions, the cry 


went up from the furnaces for more ore. And 
again Nature, which has favored America in so 
many directions, came to her assistance. Manu- 
facturers in the steel regions began to recall strange 
stories which had been floating down for many 
years from the wilderness surrounding Lake Supe- 


ior. The recollection of a famous voyage made in 
this region by Philo M. Everett, as far back as 1845, 
now laid siege to the imagination of the new gener- 
ation of ironmasters. For years the Indians had 
told Everett of the “mountains of iron” that lay on 
the Minnesota shore of Lake Superior and had de- 
scribed their wonders in words that finally impelled 
this hardy adventurer to make a voyage of explora- 
tion. For six weeks, in company with two Indian 
guides, Everett had navigated a small boat along 
the shores of the Lake, covering a distance that 
now takes only afew hours. The Indians had long 
regarded this silent, red iron region with a super- 
stitious reverence, and now, as the little party ap- 
proached, they refused to complete the journey. 


64 THE AGE OF BIG BUSINESS 


“Tron Mountain!”’ they said, pointing northward 
along the trail — ‘‘Indian not go near; white man 
go!” Thesight which presently met Everett’s eyes 
repaid him well for his solitary tramp in the forest. 
He found himself face to face with a “mountain 
a hundred and fifty feet high, of solid ore, which 
looked as bright as a bar of iron just broken.” 
Other explorations subsequently laid open the 
whole of the Minnesota fields, including the Mesa- 
ba, which developed into the world’s greatest iron 
range. America has other regions rich in ore, par- | 
ticularly in Alabama, located alongside the coal 
and limestone so necessary in steel production; yet 
it has drawn two-thirds of its whole supply from 
these Lake Superior fields. Not only the quantity, 
which is apparently limitless, but the quality exe 


plains America’s leadership in steel making. - 

Mining in Minnesota has a character which is 
not duplicated elsewhere. When we think of an iron 
mine, we naturally picture subterranean caverns 
and galleries, and strange, gnome-like creatures 
prowling about with pick and shovel and drill. But 
mining in this section is a much simpler proceed- 
ing. The precious mineral does not lie concealed 
deep within the earth; it lies practically upon the 


surface. Removing it is not a question of blasting 


THE EPIC OF STEEL 65 
with dynamite; it is merely a matter of lifting it 
from the surface of the earth with a huge steam 
shovel. “Miners” in Minnesota have none of the 
conventional aspects of their trade. They operate 
precisely as did those who dug the Panama Canal. 
The railroad cars run closely to the gigantic red pit. 
A huge steam shovel opens its jaws, descends into 
an open amphitheater, licks up five tons at each 
mouthful, and, swinging sideways over the open 
cars, neatly deposits its booty. It is not surpris- 
ing that ore can be produced at lower cost in the 
United States than even in those countries where 
the most wretched wages are paid. Evidently this 
one iron field, to say nothing of others already 
worked, gives a permanence to our steel industry. 

Not only did America have the material re- 
sources; what is even more important, she had also 
the men. American industrial history presents few 
groups more brilliant, more resourceful, and more 
picturesque than that which, in the early seven- 
ties, started to turn these Minnesota ore fields in- 
to steel—and into gold. These men had all the 
dash, all the venturesomeness, all the speculative 
and even the gambling instinct, needed for one of 
the greatest industrial adventures in our annals. 
All had sprung from the simplest and humblest 


5 


66 . THE AGE OF BIG BUSINESS 


origins. They had served their business appren- 
ticeships as grocery clerks, errand boys, telegraph 
messengers, and newspaper gamins. For the most 
part they had spent their boyhood together, had 
played with each other as children, had attended 
the same Sunday schools, had sung in the same 
church choirs, and, as young men, had quarreled 
with each other over their sweethearts. The Pitts- 
burgh group comprised about forty men, most of — 
whom retired as millionaires, though their names” 
for the most part signify little to the present-day ; 
American. Kloman, Coleman, McCandless, Shinn, 
Stewart, Jones, Vandervoort — are all important 

men in the history of American steel. Thomas 
A. Scott and J. Edgar Thomson, men associated — 
chiefly with the creation of the Pennsylvania Rail- 


road, also made their contributions. But three or — 


four men towered so preéminently above their as- 
sociates that today when we think of the human 
agencies that constructed this mighty edifice, the 
names that insistently come to mind are those of 
Carnegie, Phipps, Frick, and Schwab. 

Books have been written to discredit Carnegie’s 
work and to picture him as the man who has stolen 
success from the labor of greatermen. Yet Carnegie 
is the one member of a brilliant company who had 


THE EPIC OF STEEL 67 


the indispensable quality of genius. He had none © 
of the plodding, painstaking qualities of a Rocke- 
feller; he had the fire, the restlessness, the keen rel- 
ish for adventure, and the imagination that leaped 
far in advance of his competitors which we find 
so conspicuous in the older Vanderbilt. Carnegie 
showed these qualities from his earliest days. 
Driven as a child from his Scottish home by hun- 
ger, never having gone to school after twelve, he 
found himself, at the age of thirteen, living in a 
miserable hut in Allegheny, earning a dollar and 
twenty cents a week as bobbin-boy in a cotton mill, 
while his mother augmented the family income 
by taking in washing. Half a dozen years later 
Thomas Scott, President of the Pennsylvania Rail- 
road, made Carnegie his private secretary. How 
well the young man used his opportunities in this 
occupation appeared afterward when he turned his 
wide acquaintanceship among railroad men to prac- 
tical use in-the steel business. It was this personal 
adaptability, indeed, that explains Carnegie’s suc- 
cess. In the narrow, methodical sense he was not 
a business man at all; he knew and cared nothing 
for its dull routine and its labyrinthine details. As 
a practical steel man his position is a negligible one. 
Though he was profoundly impressed by his first 


68 THE AGE OF BIG BUSINESS 


sight of a Bessemer converter, he had little interest _ 
in the every-day process of making steel. He had 
also many personal weaknesses: his egotism was 
marked, he loved applause, he was always seeking | 


opportunities for self-exploitation, and he even as- 
pired to fame as an author and philosopher. The 
staid business men of Pittsburgh early regarded 


Carnegie with disfavor; his daring impressed them > 
as rashness and his bold adventures as the plung- 
ing of the speculator. Yet in all its aspects Carne- 
gie’s triumph was a personal one. He was perhaps — 


the greatest commercial traveler this country has 


v 


ever known. While his more methodical associ- 
ates plodded along making steel, Carnegie went out — 
upon the highway, bringing in orders by the millions. © 
He showed this same personal quality in the organ-— 
ization of his force. As a young man, entirely new — 


to the steel industry, he selected as the first man- 
ager of his works Captain Bill Jones; his amazing 


} 


judgment was justified when Jones developed into — 
America’s greatest practical genius in making steel. 
“Here lies the man”? — Carnegie once suggested — 


this line for his epitaph — “who knew how to get 
around him men who were cleverer than himself.” 
Carnegie inspired these men with his own energy and 


restlessness; the spirit of the whole establishment 


THE EPIC OF STEEL 69 


automatically became that of the pushing spirit 
of itshead. This little giant became the most re- 
morseless pace-maker in the steel regions. How- 
ever astounding might be the results obtained by 
the Carnegie works the captain at the head was 
never satisfied. As each month’s output sur- 
passed that which had gone before, Carnegie always 
came back with the same cry of “More.” ‘We 
broke all records for making steel last week!” a de- 
lighted superintendent once wired him and imme- 
diately he received his answer, “‘Congratulations. 
Why not do it every week?”’ This spirit explains 
the success of the Carnegie Company in outdis- 
tancing all its competitors and gaining a world- 
wide preéminence for the Pittsburgh district. But 
Carnegie did not make the mistake of capitalizing 
all this prosperity for himself; his real greatness as 
an American business man consists in the fact that 
he liberally shared the profits with his associates. 
Ruthless he might be in appropriating their last 
ounce of energy, yet he rewarded the successful 
men with golden partnerships. Nothing delighted 
Carnegie more than to see the man whom he had 
lifted from a puddler’s furnace develop into a 
millionaire. 

Henry Phipps, still living at the age of seventy- 


70 THE AGE OF BIG BUSINESS 


eight, was the only one of Carnegie’s early asso= 
ciates who remained with him to the end. Like 
many of the others, Phipps had been Carnegie’s 
playmate as a boy, so far as any of them, in those 


early days, had opportunity to play; like all his | 
contemporaries also, Phipps had been wretchedly | 
poor, his earliest business opening having been as 
messenger boy for a jeweler. Phipps had none of 
the dash and sparkle of Carnegie. He was the 


plodder, the bookkeeper, the economizer, the man 
who had an eye for microscopic details. “‘What_ 
we most admired in young Phipps,” a Pittsburgh 
banker once remarked, “‘is the way in which he 
could keep a check in the air for three or four 


b 


days.” His abilities consisted mainly in keeping 
the bankers complaisant, in smoothing the ruf- 
fled feelings of creditors, in cutting out unneces- 
sary expenditures, and in shaving prices. 
Carnegie’s other two more celebrated associates, 
Henry C. Frick and Charles M. Schwab, were 
younger men. Frick was cold and masterful, as 
hard, unyielding, and effective as the steel that 
formed the staple of his existence. Schwab was 
enthusiastic, warm-hearted, and happy-go-lucky; 
a man who ruled his employees and obtained his 
results by appealing to their sympathies. Themen 


THE EPIC OF STEEL 71 


of the steel yards feared Frick as much as they 
loved “Charlie” Schwab. The earliest glimpses 
which we get of these remarkable men suggest cer- 
tain permanent characteristics: Frick is pictured 
as the sober, industrious bookkeeper in his grand- 
father’s distillery; Schwab as the rollicking, whis- 
tling driver of a stage between Loretto and Cres- 
son. Frick came into the steel business as a mat- 
ter of deliberate choice, whereas Schwab became 
associated with the Pittsburgh group more or less 
by accident. 

The region of Connellsville contains almost 150 
square miles underlaid with coal that has a par- 
ticular heat value when submitted to the process 
known as coking. As early as the late eighties cer- 
tain operators had discovered this fact and were 
coking this coal on a small scale. It is the highest 
tribute to Frick’s intelligence that he alone fore- 
saw the part which this Connellsville coal was to 
play in building up the Pittsburgh steel district. 
The panic of 1873, which laid low most of the 
Connellsville operators, proved Frick’s opportun- 
ity. Though he was only twenty-four years old he 
succeeded, by his intelligence and earnestness, in 
borrowing money to purchase certain Connellsville 
mines, then much depreciated in price. From that 


72 THE AGE OF BIG BUSINESS 


moment, coke became Frick’s obsession, as steel 
had been Carnegie’s. With his early profits he pur- | 


chased more coal lands until, by 1889, he owned ten | 
thousand coke ovens and was the undisputed “coke | 
king”’ of Connellsville. Several years before this, 


Carnegie had made Frick one of his marshals, coke 
having become indispensable to the manufacture of 
steel, and in 1889 the former distiller’s accountant 
became Carnegie’s commander-in-chief. Probably 
the popular mind associates Frick chiefly with the 
importation of Slavs as workmen, with the terrible 
strikes that followed in consequence at Homestead, 
with the murderous attack made upon him by 
Berkman, the anarchist, and with his bitter, long- 
drawn-out quarrel with Andrew Carnegie. Frick’s 
stormy career was naturally the product of his 
character. 


On the other hand, temperamental pliability — 


and lovableness were the directing traits of the 
man who, in his way, made contributions quite as 
solid to the extension of the Pittsburgh steel in- 
dustry. Schwab worked with the human material 
quite as successfully as other men worked with 
iron ore, Bessemer furnaces, and coal. He handled 
successfully what was perhaps the greatest task 
in management ever presented to a manufacturer 


THE EPIC OF STEEL 73 


when to him fell the job of reorganizing the Home- 
stead Works after the strike of 1892 and of trans- 
forming thousands of riotous workmen into orderly 
and interested producers of steel. In three or four 
years practically every man on the premises had be- 
come “Charlie” Schwab’s personal friend, and the 
Homestead property which, until the day he took 
charge, had been a colossal failure, had developed 
into one of the most profitable holdings of the 
Carnegie Company. As his reward Schwab, at 
the age of thirty-four, was made President of the 
Carnegie corporation. Only sixteen years before 
he had entered the steel works as a stake driver 
at a dollar a day. 

When the Carnegie group began operations in 
the early seventies, American steel, as a British 
writer remarked, was a “hot-house product”’; yet 
in 1900 the Carnegie partners divided $40,000,000 
as the profits of a single year. They had demon- 
strated that the United States, despite the high 
prices that prevailed everywhere, could make steel 
more cheaply than any other country. Foreign ob- 
servers have offered several explanations for this 
achievement. American makers had an endless 
supply of cheap and high-grade ore, cheaper coke, 
cheaper transportation, and workmen of a superior 


74 THE AGE OF BIG BUSINESS 


skill. We must give due consideration to the fact 
that their organization was more flexible than those 
of older countries, and that it regulated promotion 
exclusively by merit and gave exceptional oppor- 
tunities to young men. American steel makers also’ 
had scrap heaps whose size astounded the foreign. 
observers; they never hesitated to discard the most 
expensive plants if by so doing they could reduce 
the cost of steel rails by a dollar a ton. Machinery 
for steel making had a more extensive development 
in this country than in England orGermany. Mr. 
Carnegie also enjoyed the advantages of a high pro- 
tective tariff, though about 1900 he discovered that 
his extremely healthy infant no longer demanded 
this form of coddling. But probably the Carnegie 
Company’s greatest achievement was the abolition 
of the middleman. Ina few years it assembled all 
the essential elements of steel making in its own 
hands. Frick’s entrance into the combination gave 
the concern an unlimited supply of the highest 
grade of coking coal. In a few years, the Carnegie 
interests had acquired great holdings in the Minne- 
sota ore regions. 

At first glance, the Pittsburgh region seems 
hardly the ideal place for the making of steel. For- 
tune first placed the industry there because all the 


THE EPIC OF STEEL 75 


/raw materials, especially iron ore and coal, seemed 
‘to exist in abundance. But the discovery of the 
Minnesota ore field, which alone could supply this 
essential product in the amounts which the fur- 
naces demanded, immediately deprived the Pitts- 
burgh region of its chief advantage. As a result 
of this sudden development, the manufacturers of 
Pittsburgh awoke one morning and discovered that 
their ore was located a thousand miles away. To 
bring it to their converters necessitated a long 
voyage by water and rail, with several reloadings. 
They overcame these obstacles by developing ma- 
chinery for handling ore and by acquiring the raw 
materials and the connecting links of transporta- 
tion. Ore which had been lying in the wilds of 
Minnesota on Monday morning was thus brought 
to Pittsburgh and made into steel rails or bridges 
or structural shapes by Saturday night. The Car- 
negie Company first acquired sufficient mineral 
lands to furnish ore for several generations and or- 
ganized an ore fleet which transported the products 
of the mines through the lakes to ports on Lake 
Erie, particularly Ashtabula and Conneaut. The 
purchase of the Bessemer and Lake Erie Railroad, 
which extended from Conneaut to Pittsburgh, made 
this great transportation route complete. Besides 


76 THE AGE OF BIG BUSINESS 


freeing their business from uncertainty, this elimi- 
nation of middlemen naturally produced great 


| 


economies. 


- Probably Andrew Carnegie’s shrewdness in nam- 
ing his first plant the J. Edgar Thompson Steel 
Works, after the powerful President of the Penn- 
sylvania Railroad, and in making Thompson and 
his associate Scott partners, had much to do with 
his early success. These two gentlemen conferred 
two priceless favors upon the struggling enterprise. 
They became large purchasers of steel rails and 
their influence in this direction extended far be- 
yond the Pennsylvania Railroad. What was per- 
haps even more important, they gave the Carnegie 
concerns railroad rebates. The use of rebates, as 
a method of stifling competition and building up a 
great industrial prosperity, is an offense which the 
popular mind associates almost exclusively with 
the Standard Oil Company, yet the Carnegie for- 
tune, as well as that of John D. Rockefeller, re- 
ceived an artificial stimulation of this kind. 
Though incomparably the greatest of the Amer- | 
ican steel companies, the Carnegie Steel Company 
by no means monopolized the field. In forty years, 
indeed, an enormous steel area had grown up, in- 
cluding western Pennsylvania, Ohio, Indiana, and | 


THE EPIC OF STEEL 77 


Illinois, practically all of it drawing its raw mate- 
rials from those same teeming ore lands in the Lake 
Superior region. Johnstown, Youngstown, Cleve- 
land, Lorain, Chicago, and Joliet, became head- 
quarters of steel production almost as important as 
Pittsburgh itself. Twoentirely new steel kingdoms, 
each with its own natural reservoirs of ore, grew up 
in Colorado and Alabama. The Colorado Fuel and 
Iron Company, which possessed apparently inex- 
haustible mineral lands in Colorado, Wyoming, 
Utah, New Mexico, and California, itself produces 
not far from three million tons a year, almost half 
the present production of Great Britain. The Ala- 
bama steel country has developed in even more 
spectacularfashion. Birmingham, a hive of south- 
ern industry placed almost as if by magic in the lei- 
surely cotton lands of the South, had no existence 
in 1870, when the Pittsburgh prosperity began. 
In the Civil War, the present site of a city with 
a population of 140,000 was merely a blacksmith 
shop in the fork of the roads. Yet this district has 
advantages for the manufacture of steel that have 
no parallel elsewhere. The steel companies which 
are located here do not have to bring their ma- 
terials laboriously from a distance but possess, im- 
mediately at hand, apparently endless store of the 


78 THE AGE OF BIG BUSINESS 


three things needful for making steel — iron ore, 
coal, and limestone. All these territories have their 
personal romances and their heroes, many of them 
quite as picturesque as those of the Pittsburgh 
group. 

It is doubtful indeed if American industry pre- 
sents any figure quite as astonishing and variegated 
as that of John W. Gates, the man who educated 
farmers all over the world to the use of wire fencing. 
Half charlatan, half enthusiast, speculator, gam- 
bler, a man who created great enterprises and who 
also destroyed them, at times an up-building force 
and at other times a sinister influence, Gates com- 
pletely typified a period in American history that, 
along with much that was heroic and splendid, had 
much also that was grotesque and sordid. The 
opera-bouffe performance that laid the foundations 
of Gates’s great industry was in every way charac- 
teristic of this period. In 1871 Gates, then a clerk 
in a hardware store at twenty-five dollars a week, 
made his first attempt to sell barbed wire in the 
great cattle countries of the southwestern States. 
When the cattle men in Texas first saw this barbed 
wire, they ridiculed the idea that it could ever hold 
their steers. Gates selected a plaza in San Antonio, 
fenced it in with his new product, and invited the 


THE EPIC OF STEEL 79 


enemies to bring along their wildest specimens. 
About thirty of Texas’ most ferocious cattle, placed 
within the enclosure, spent a whole afternoon 
plunging at the barbs in a useless and tormenting 
attempt to escape. This spectacular demonstra- 
tion of efficiency launched Gates fairly upon his 
eareer. He immediately began to sell his new fenc- 
ing on an enormous scale; in a few years the whole 
world was demanding it, and it has become, as re- 
cent events have disclosed, a particularly formid- 
able munition of war. The American Steel and 
Wire Company, one of the greatest of American 
corporations, was the ultimate outgrowth of that 
lively afternoon in San Antonio. 

In 1900 the Carnegie Steel Company was making 
one-quarter of all the Bessemer steel produced in 
the United States. It owned in abundance all the 
properties which were essential to its completed 
output — coal, limestone, steel ships, railroads, and 
steel mills. In twenty-five years, from 1875 to 
1900, this manufacturing enterprise had paid the 
Carnegie group profits aggregating $133,000,000, 
profits which, in the closing years of the century, 
had increased at a stupendous rate. In 1898 Car- 
hegie and his associates had divided $11,500,000, 
in 1899 their earnings had grown to $25,000,000, and 


80 THE AGE OF BIG BUSINESS | 


in 1900 the aggregate had suddenly jumped to $40,- 
000,000. Of this latter sum Carnegiereceived $25,- 
000,000, Phipps $5,500,000, Frick $2,600,000, and 
Schwab $1,300,000. And Carnegie’s little group 
could see no limit to the growth of their business 
and the expansion of their personal fortunes. Yet 
at that very moment Carnegie was planning to 
play the part of a Charles V. with the large em- 
pire which he had pieced together—to abdicate 
his throne, retire from business life, and spend his 
remaining days in quiet. 

Many influences were impelling him to this de- 
cision. His triumph, stupendous as it had been, 
also had had its alloy of sorrow. Indeed this little 
Scotsman, now at the crowning of his glory, was 
one of the loneliest figures in the world. Practi- 
cally all the forty men with whom he had been 
closely associated had vanished from the scene. 
He had quarreled with his playmate and lifelong 
partner, Henry Phipps, and was in the worst pos- 
sible business and personal relations with Frick. 
He had no son to carry on his work. He had be- 
come greatly interested in his philanthropies, and 
he had declared that the man who died rich died 
disgraced. Moreover, new influences were rising 
in the steel trade with which Carnegie had little 


=r 


THE EPIC OF STEEL 81 


sympathy. Its national capital seemed to be shift- 
ing from Pittsburgh to Wall Street. New men who 
knew nothing about steel but who possessed an 
intimate acquaintance with stocks and bonds — 
J. Pierpont Morgan, George W. Perkins, and their 
associates — were branching out as controllers of 
large steel interests. Carnegie had no interest in 
Wall Street; he has declared that he never specu- 
lated in his life and that he would immediately 
dissociate himself from any partner who would do 
so. This Wall Street coterie, in the years from 
1898 to 1900, had made several large combina- 
tions in the steel trade. That was the era when the 
trust mania had gained possession of the American 
mind and when its worst features displayed them- 
selves. The Federal Steel Company, the American 
Bridge Company, the American Steel and Wire, the 
National Tube Company, all representing the as- 
sembling of large works which had been engaged 
as rivals in similar enterprises, were launched, 
with the usual accompaniments of “underwriting 
syndicates,’’ watered stock, and Wall Street spec- 
ulation. This sort of thing madeno appeal to An- 
drew Carnegie. His huge enterprise had always 
remained essentially a copartnership, and he had 
frequently expressed his abhorrence of trusts. 
6 


82 THE AGE OF BIG BUSINESS 


Yet, in spite of his wish to retire from business 
and in spite of his avowed intention to die poor, 
Carnegie now adopted the policy of the Sibylline 
leaves to all prospective purchasers. Moore and 
Reid would have purchased his interest for $157,- 
000,000; when Rockefeller came along the price had 
risen to $250,000,000; when the oil man shook his 
head and retired, Carnegie immediately raised his 
price to $500,000,000. It is doubtful whether he 
would have sold at all had not his Wall Street com- 
petitors begun to encroach on a field which the little 
Scotsman understood quite as well as they — the 
production and merchandising of steel. The newly 
organized combinations were completing elaborate 
plans to go after Carnegie’s business. Then Car- 
negie, who had practically retired from active life, 
again arrayed himself in his shirt-sleeves, aban- 
doned his career of authorship, and resumed his 
early trade. His first attacks produced an immense 
reverberation in the House of Morgan. He pur- 
chased a huge tract at Conneaut and began build- 
ing a gigantic plant for the manufacture of steel 
tubes, a business in which he had not hitherto 
engaged. This was a blow aimed at one of Mor- 
gan’s pet new creations, the National Tube Com- 
pany. Should Carnegie finish his works, there 


bj 
THE EPIC OF STEEL 83 
Was no doubt the Morgan enterprise would be 
ruined, for the new plant would be far more modern 
and so could manufacture the product at a much 
lower price; and, with Charles M. Schwab as active 
manager, what possible chance would the older cor- 
poration have? But Carnegie struck his enemy at 
aneven more vulnerable point. The Pennsylvania 
Railroad had a practical monopoly of traffic in and 
out of Pittsburgh, and Pittsburgh “created” more 
freight business than any other city in the world. 
Carnegie lent his powerful support to George J. 
Gould; who was then extending his raiiroad system 
into the preémpted field and was also making 
surveys and had financed a company to build an 
entirely new railroad from Pittsburgh to the At- 
lantic Coast. As Carnegie himself controlled the 
larger part of the freight that made Pittsburgh such 
an essential feeder to railroads, his new enterprise 
caused the greatest alarm. At the same time Car- 
negie equipped a new and splendid fleet of ore 
ships, his purpose being to enter a field of transpor- 
tation which John D. Rockefeller had found ex- 
iremely profitable. 

Such were the circumstances and such were the 
motives that gave birth to the world’s largest cor- 
poration. All one night, so the story goes, Charles 


84 THE AGE OF BIG BUSINESS | 
M. Schwab and John W. Gates discussed the steel 
situation with J. Pierpont Morgan. There was 
only one possible solution, they said — Andrew 
Carnegie must be bought out. By the time the 
morning sun came through the windows Morgan 
had been convinced. “Go and ask him what he 
will sell for,”” he said to Schwab. In a brief period 
Schwab came back to Morgan with a letter which 
contained the following figures — five per cent gold 
bonds $303,450,000; preferred stock $98,277,100; 
common stock $90,279,000 — a total of over $492,- 
000,000. Carnegie demanded no cash; he preferred 


to hold a huge first mortgage on a business whose 
golden opportunities he knew so well. Morgan, 
who had been accustomed all his life to dictate to 
other men, had now met a man who was able to 
dictate to him. And he capitulated. The man 
who fifty-three years before had started life in a 
new country as a bobbin-boy at a dollar and twenty 
cents a week, now at the age of sixty-six retired 
from business the second richest man in the world, 
With him retired a miscellaneous assortment of 
millionaires whose fortunes he had made and whose 
subsequent careers in the United States and in 
Europe have given a peculiar significance to the 
name “Pittsburgh Millionaires.” The United 


: 
‘ 


. 


THE EPIC OF STEEL 85 


States Steel Corporation, the combination that in- 
cluded not only the Carnegie Company but seventy 
per cent of all the steel concerns in the country, 
was really a trust made up of trusts. It had a 
capitalization of a billion and a half, of which 
about $700,000,000 was composed of the commodity 
usually known as “water”; but so greatly has its 
business grown and so capably has it been managed 
that all this liquid material has since been con- 
verted into more solid substance. The disappear- 
ance of Andrew Carnegie and his coworkers and 
the emergence of this gigantic enterprise completed 
the great business cycle in the steel trade. The 
age of individual enterprise and competition had 
passed — that of corporate control had arrived. 


CHAPTER IV 


THE TELEPHONE: ‘“‘AMERICA’S MOST POETICAL 
ACHIEVEMENT” 


A DISTINGUISHED English journalist, who was vis- 
iting the United States, in 1917, on an important 
governmental mission, had an almost sublime il- 
lustration of the extent to which the telephone had 
developed on the North American Continent. Sit- 
ting at a desk in a large office building in New York, 
Lord Northcliffe took up two telephone receivers 
and placed one at each ear. In the first he heard 
the surf beating at Coney Island, New York, and 
in the other he heard, with equal distinctness, 
the breakers pounding the beach at the Golden 
Gate, San Francisco. Certainly this demonstration 
justified the statement made a few years before 
by another English traveler. ‘What startles and 
frightens the backward European in the United 
States,” said Mr. Arnold Bennett, “is the effi- 


ciency and fearful universality of the telephone. 
86 : 


To me it was the proudest achievement and 
the most poetical achievement of the American 
people.” 

Lord Northcliffe’s experience had a certain 
dramatic justice which probably even he did not 


THE TELEPHONE 87 


appreciate. He is the proprietor of the London 
Times, a newspaper which, when the telephone was 
first introduced, denounced it as the “latest Amer- 
ican humbug” and declared that it “was far in- 
ferior to the well-established system of speaking 
tubes.” The London Times delivered this solemn 
judgment in 1877. A year before, at the Phila- 
delphia Centennial Exposition, Don Pedro, Em- 
peror of Brazil, picked up, almost accidentally, a 
queer cone-shaped instrument and put it to his ear. 
“My God! It talks!” was his exclamation; an 
incident which, when widely published in the press, 
first informed the American people that another 
of the greatest inventions of all times had had its 
birth on their own soil. Yet the initial judgment 
of the American people did not differ essentially 
from the opinion which had been more coarsely 
expressed by the leading English newspaper. Our 
fathers did not denounce the telephone as an 
“American humbug,” but they did describe it as a 
curious electric “toy” and ridiculed the notion that 


| 
88 THE AGE OF BIG BUSINESS | 
it could ever have any practical value. Even after 
Alexander Graham Bell and his associates had com- 


pletely demonstrated its usefulness, the Western 


Union Telegraph Company refused to purchase all 
their patent rights for $100,000! Only forty years 
have passed since the telephone made such an ins 
auspicious beginning. It remains now, as it was 
then, essentially an American achievement. Oth 
nations have their telephone systems, but it is only 
in the United States that its possibilities have been 
even faintly realized. It is not until Americans 
visit foreign countries that they understand that, 
imperfect as in certain directions their industrial 
and social organization may be, in this respect at 
least their nation is preéminent. 

The United States contains nearly all the tld 
phones in existence, to be exact, about seventy-five 
per cent. We have about ten million telephones, 
while Canada, Central America, South America, 
Great Britain, Europe, Asia, and Africa all com- 
bined have only about four million. In order to 
make an impressive showing, however, we need not 
include the backward peoples, for a comparison 
with the most enlightened nations emphasizes the 
same point. Thus New York City has more teie- 
phones than six European countries taken together 


pars > 


THE TELEPHONE 89 


— Austria-Hungary, Belgium, Norway, Denmark, 
Italy, and the Netherlands. Chicago, with a pop- 
ulation of 2,000,000, has more telephones than 
the whole of France, with a population of 40,000,- 
000. Philadelphia, with 1,500,000, has more than 
the Russian Empire, with 166,000,000. Boston has 
more telephones than Austria-Hungary, Los An- 
geles more than the Netherlands, and Kansas City 
more than Belgium. Several office buildings and 
hotels in New York City have more instruments 
than the kingdoms of Greece or Bulgaria. The 
whole of Great Britain and Ireland has about 
650,000 telephones, which is only about 200,000 
more than the city of New York. 

Mere numbers, however, tell only half the story. 
It is when we compare service that American 
superiority stands most manifest. The London 
newspapers are constantly filled with letters abus- 
ing the English telephone system. If these com- 
munications describe things accurately, there is. 
apparently no telephone vexation that the Eng- 
lishman does not have to endure. Delays in 
getting connections are apparently chronic. At 
times it seems impossible to get connections at 


ll, especially from four to five in the afternoon 
when the operators are taking tea. Suburban 


} 
| 
90 THE AGE OF BIG BUSINESS : 
connections, which in New York take about ninety 
seconds, average half an hour in London, and many 
of the smaller cities have no night service. An 
American thinks nothing of putting in a telephone: 
he notifies his company and in a few days the in- 
strument is installed. We take a thing like this 


for granted. But there are places where a meré 


telephone subscription, the privilege of having an 
instrument installed, is a property right of con- 
siderable value and where the telephone service 
has a “‘waiting list,’ like an exclusive club. In 
Japan one can sell a telephone privilege at a good 
price, its value being daily quoted on the Stock 
Exchange. Americans, by constantly using the 
telephone, have developed what may be called a 
sixth sense, which enables them to project thei 
personalities over an almost unlimited area. In 
the United States the telephone has become the one 
all-prevailing method of communication. The 
European writes or telegraphs while the American 
more frequently telephones. In this country the 
telephone penetrates to places which even the mails 
never reach. The rural free delivery and othe1 
forms of the mail service extend to 58,000 com- 
munities, while our 10,000,000 telephones encom- 
pass 70,000. We use this instrument for all the 


THE TELEPHONE 91 


varied experiences of life, domestic, social, and 
commercial. There are residences in New York 
City that have private branch exchanges, like a 
bank or a newspaper office. Hostesses are more and 
more falling into the habit of telephoning invita- 
tions for dinner and other diversions. Many people 
find telephone conversations more convenient than 
personal interviews, and it is every day displacing 
the stenographer and the traveling salesman. 
Perhaps the most noteworthy achievement of the 
telephone is its transformation of country life. In 
Europe, rural telephones are almost unknown, 
while in the United States one-third of all our tele- 
phone stations are in country districts. The farmer 
no longer depends upon the mails; like the city 
man, he telephones. This instrument is thus the 
preatest civilizing force we have, for civilization 
is very largely a matter of intercommunication. 
Indeed, the telephone and other similar agencies, 
such as the parcel post, the rural free delivery, 
better roads, and the automobile, are rapidly trans- 
forming rural life in this country. In several re- 
gions, especially in the Mississippi Valley, a farmer 
who has no telephone is in a class by himself, 


ike one who has no mowing-machine. Thus the 
test returns from Iowa, taken by the census as 


92 THE AGE OF BIG BUSINESS 


far back as 1907, showed that seventy-three per 
cent of all the farms — 160,000 out of 220,000 = 
had telephones and the proportion is unquestion- 
ably greater now. Every other farmhouse from 
the Atlantic to the Pacific contains at least one 
instrument. These statistics clearly show that the 
telephone has removed half the terrors and isola- 
tion of rural life. Many a lonely farmer’s wife or 
daughter, on the approach of a suspicious-looking 
character, has rushed to the telephone and called 
up the neighbors, so that now tramps notoriously 


avoid houses that shelter the protecting wires. In 
remote sections, insanity, especially among women, 
is frequently the result of loneliness, a calamity 
which the telephone is doing much to mitigate. 

In the United States today there is one telephone 
to every nine persons. This achievement repre- 
sents American invention, genius, industrial organ- 
ization, and business enterprise at their best. The 
story of American business contains many chap- 
ters and episodes which Americans would willingly 
forget. But the American Telephone and Tele- 
graph Company represents an industry which has 
made not a single “swollen fortune, ”’ whose largest 
stockholder is the wife of Alexander Graham Bell, 
the inventor (a woman who, being totally deaf, 


THE TELEPHONE 93 


has never talked over the telephone); which has 
not corrupted legislatures or courts; which has 
steadily decreased the prices of its products as 
business and profits have increased; which has 
never issued watered stock or declared fictitious 
dividends; and which has always manifested a high 
sense of responsibility in its dealings with the 
public. 

Two forces, American science and American 
business capacity, have accomplished this result. 
As a mechanism, this American telephone system 
is the preduct not of one but of many minds. What 
most strikes the imagination is the story of Alex- 
ander Graham Bell, yet other names — Carty, 
Scribner, Pupin — play a large part in the story. 
The man who discovered that an electric current 
had the power of transmitting sound over a copper 
wire knew very little about electricity. Had he 
known more about this agency and less about 
acoustics, Bell once said himself, he would never 
have invented the telephone. His father and 
prandiather had been teachers of the deaf and 
dumb and had made important researches in acous- 

ics. Alexander Graham Bell, born in Edinburgh 

March, 1847, and educated there and in London, 
ollowed the ancestral example. This experience 


94 THE AGE OF BIG BUSINESS 


gave Bell an expert knowledge of phonetics that 
laid the foundation for his life work. His inven- 
tion, indeed, is clearly associated with his attempts 
to make the deaf and dumb talk. He was driven 
to America by ill-health, coming first to Canada, 
and in 1871 he settled in Boston, where he accepted 
a position in Boston University to introduce his 
system of teaching deaf-mutes. He opened a 


> 


school of ‘‘Vocal Physiology,” and his success in 
his chosen field brought him into association with 
the people who afterward played an important part 
in the development of the telephone. Not a single 
element of romance was lacking in Bell’s experi- 
ence; his great invention even involved the love 
story of his life. Two influential citizens of Boston, 
Thomas Sanders and Gardiner G. Hubbard, had 
daughters who were deaf and dumb, and both 
engaged Bell’s services as teacher. Bell lived in 
Sanders’s home for a considerable period, dividing 
his time between teaching his little pupil how te 
talk and puttering away at a proposed invention 
which he called a ““harmonic telegraph.” Both 
Sanders and Hubbard had become greatly inter- 
ested in this contrivance and backed Bell finan: 
cially while he worked. It was Bell’s idea that, by 


a system of tuning different telegraphic receivers 


jell 


THE TELEPHONE 95 


to different pitches, several telegraphic messages 
pould be sent simultaneously over the same wire. 
[he idea was not original with Bell, although he 
supposed that it was and was entirely unaware 
that, at the particular moment when he started 
work, about twenty other inventors were strug- 
sling with the same problem. It was one of these 
pther twenty experimenters, Elisha Gray, who ulti- 
mately perfected this instrument. Bell’s researches 
lave an interest only in that they taught him much 
ubout sound transmission and other kindred sub- 
ects and so paved the way for his great conception. 

One day Hubbard and Sanders learned that 
Bell had abandoned his “harmonic telegraph” and 


was experimenting with an entirely new idea. This 
was the possibility of transmitting the human voice 
ver an electric wire. While working in Sanders’s 
jasement, Bell had obtained from a doctor a dead 
man’s ear, and it is said that while he was minutely 
studying and analyzing this gruesome object, the 
dea of the telephone first burst upon his mind. 
For years Bell had been engaged in a task that 
seemed hopeless to most men — that of making 
leaf-mutes talk. ‘If I can make a deaf-mute talk, 
[ can make iron talk,” he declared. ‘If I could 


make a current of electricity vary in intensity as 


96 THE AGE OF BIG BUSINESS 


the air varies in density,” he said at another time, 
“IT could transmit sound telegraphically.”’ Many 
others, of course, had dreamed of inventing such 
an instrument. The story of the telephone con- 


cerns many men who preceded Bell, one of whom, 
Philip Reis, produced, in 1861, a mechanism that 
could send a few discordant sounds, though not the 


human voice, over an electric wire. Reis seemed to 
have based his work upon an article published in 
The American Journal of Science by Dr. C. G. Page, 
of Salem, Mass., in 1837, in which he called attention 
to the sound given out by an electric magnet when 
the circuit is opened or closed. The work of these 
experimenters involves too many technicalities for 


discussion in this place. The important facts are 
that they all involved different principles from 
those worked out by Bell and that none of them 
ever attained any practical importance. Reis, in 
particular, never grasped the essential principles 
that ultimately made the telephone a reality. His 
work occupies a place in telephone history only be- 
cause certain financial interests, many years after 
his death, brought it to light in an attempt to 
discredit Bell’s claim to priority as the inven- 
tor. An investigator who seems to have grasped 
_imore clearly the basic idea was the distinguished 


' 


THE TELEPHONE 97 


American inventor Elisha Gray, already mentioned 
as the man who had succeeded in perfecting the 
“harmonic telegraph.”” On February 14, 1876, 
Gray filed a caveat in the United States Pat- 
ent Office, setting forth pretty accurately the con- 
ception of the electric telephone. The tragedy in 
Gray’s work consists in the fact that, two hours 
before his caveat had been put in, Bell had filed 
his application for a patent on the completed 
instrument. 

The champions of Bell and Gray may dispute the 
guestion of priority to their heart’s content; the 
historic fact is that the telephone dates from a 
dramatic moment in the year 1876. Sanders and 
Hubbard, much annoyed that Bell had abandoned 
his harmonic telegraph for so visionary an idea as a 
long distance talking machine, refused to finance 
him further unless he returned to his original quest. 
Disappointed and disconsolate, Bell and his assist- 
ant, Thomas A. Watson, had started work on the 
top floor of the Williams Manufacturing Company’s 
shop in Boston. And now another chance happen- 
ing turned Bell back once more to the telephone. 
His magnetized telegraph wire stretched from one 
room to another located in a remote part of the 
building. One day Watson accidentally plucked a. 


7 


98 THE AGE OF BIG BUSINESS 


piece of clock wire that lay near this telegraph wire, 
and Bell, working in anotherroom, heard the twang. 
A few seconds later Watson was startled when an 
excited and somewhat disheveled figure burst into’ 
his room. ‘‘ What was that?” shouted Bell. What 
had happened was clearly manifest; a sound had 


been sent distinctly over an electric wire. Bell’s 
harmonic telegraph immediately went into the dis- | 
card, and the young inventor — Bell was then only 
twenty-nine — became a man of one passionate 
idea. Yet final success did not come easily; the 
inventor worked day and night for forty weeks 
before he had obtained satisfactory results. It 
was on March 10, 1876, that Watson, in a distant 
room, picked up the first telephone receiver and 
heard these words, the first that had ever passed 
over a magnetized wire, “Come here, Watson; I 


> 


want you.”’ The speaking instrument had become 
a reality, and the foundation of the telephone, in 
all its present development, had been laid. When 
the New York and San Francisco line was opened 
in January, 1915, Alexander Graham Bell spoke 
these same words to his old associate, Thomas Wat- 
son, located in San Francisco, both men using the’ 
same instruments that had served so well on that 


historic occasion forty years before. 


THE TELEPHONE 99 


_ Though Bell’s first invention comprehended the 
great basic idea that made it a success, the instru- 
ment itself bore few external resemblances to that 
which has become so commonplace today. If one 
could transport himself back to this early period 
and undergo the torture of using this primitive 
telephone, he would appreciate somewhat the labor, 
the patience, the inventive skill, and the business 
organization that have produced the modern tele- 
phone. In the first place you would have no sepa- 
rate transmitter and receiver. You would talk 
into a funnel-shaped contrivance and then place 
it against your ear to get the returning message. 
In order to make yourself heard, you would have to 
shout like a Gloucester sea-captain at the height 
of astorm. More than the speakers’ voices would 
come over the wire. It seemed to have become the 
playground of a million devils; moanings, shriek- 
ings, mutterings, and noises of all kinds would 
constantly interrupt the flow of speech. To call 
up your “party” you would not merely lift the 
receiver as today; you would tap with a lead 
pencil, or some other appliance, upon the dia- 
phragm of your transmitter. There were no sepa- 
ratetelephone wires. The talking at first was done 
over the telegraph lines. The earliest “centrals” 


| 


100 THE AGE OF BIG BUSINESS 


reminded most persons of madhouses, for the day 
of the polite, soft-spoken telephone girl had not ar- 
rived. Instead, boys were rushing around with the 
ends of wires which they were frantically attempt- 
ing to peg into the holes of the primitive switch- 
board and so establish “‘connections.”’ When not 
knocking down and fighting each other, these boys 
were swearing into transmitters at the customers; 
and it is said that the incurable profanity of these 
early ‘‘telephone boys” had much to do with their 
supersession by girls. In the early days of the 


A 


telephone, each instrument had to carry its own 
battery, usually installed in a little box under the 
transmitter. The early telephone wires, even in 
the largest cities, were strung on poles, as they are” 
in country and suburban districts today. In places 
like New York and Chicago, these thousands of 
overhanging wires not only destroyed the attrac- 
tiveness of the thoroughfare, but constantly inter- 
fered with the fire department and proved to be 
public nuisances in other ways. A telephone wire, 
however, loses much of its transmitting power when» 
placed under ground, and it took many years of ex- 
perimenting before the engineers perfected these 
subways. In these early days, of course, the tele- 
phone was purely alocal matter. Certain visionary 


THE TELEPHONE 102 


| enthusiasts had foreseen the possibility of a na- 
tional, long distance system, but a large amount 
| of labor, both in the laboratory and out, was to be 
|expended before these aspirations could become 
realities. 
The transformation of this rudimentary means 
|of communication into the beautiful mechanism 
which we have today forms a splendid chapter in 
the history of American invention. Of all the de- 
| tails in Bell’s apparatus the receiver is almost the 
only one that remains now what it was forty years 
ago. The story of the transmitter in itself would 
| filla volume. Edison’s success in devising a trans- 
/mitter which permitted talk m ordinary conver- 
sational tones — an invention that became the 
property of the Western Union Telegraph Com- 
pany, which early embarked in the telephone busi- 
ness — at one time seemed likely to force the Bell 
Company out of business. But Emile Berliner and 
Francis Blake finally came to the rescue with an 
excellent instrument, and the suggestion of an 
English clergyman, the Reverend Henry Hum- 
‘mings, that carbon granules be used on the dia- 
phragm, made possible the present perfect instru- 
‘ment. The magneto call bell — still used in cer- 
tain backward districts — for many years gave fair 


102 THE AGE OF BIG BUSINESS 


results for calling purposes, but the automatic 
switch, which enables us to get central by merely 
picking up the receiver, has made possible our great 
urban service. It was several years before the 
telephone makers developed so essential a thing as 
a satisfactory wire. Silver, which gave excellent 
results, was obviously too costly, and copper, the 
other metal which had many desirable qualities, 
was too soft. Thomas B. Doolittle solved this 
problem by inventing a hard-drawn copper wire. 
A young man of twenty-two, John J. Carty, 
suggested a simple device for exorcising-the hun- 
dreds of “‘mysterious noises” that had made the 
use of the telephone so agonizing. It was caused, 
Carty pointed out, by the circumstance that the 
telephone, like the telegraph, used a ground circuit 
for the return wire; the resultant scrapings and 
moanings and howlings were merely the multitu- 
dinous voices of mother earth herself. Mr. Carty 
began installing the metallic circuit in his lines — 
that is, he used wire, instead of the ground, to 
complete the circuit. As a result of this improve- 
ment the telephone was immediately cleared of 
these annoying interruptions. Mr. Carty, who is 
now Chief Engineer of the American Telephone and 
Telegraph Company, and the man who has super- 


THE TELEPHONE 103 


intended all its extensions in recent years, is one of 
the three or four men who have done most to create 
the present system. Another is Charles KE. Scribner, 
who, by his invention of that intricate device, the 
multiple switchboard, has converted the telephone 
exchange into a smoothly working, orderly place. 
Scribner’s multiple switchboard dates from about 
1890. It was Mr. Scribner also who replaced 
the individual system of dry cells with one com- 
mon battery located at the central exchange, an 
improvement which saved the Company 4,000,- 
000 dry cells a year. Then Barrett discovered a 
method of twisting fifty pairs of wires — since 
grown to 2400 pairs — into a cable, wrapping them 
in paper and molding them in lead, and the wires 
were now taken from poles and placed in conduits 
underground. 

But perhaps the most romantic figure in tele- 
phone history, next to Bell, is that of a humble Ser- 
vian immigrant who came to this country as a boy 
and obtained his first employment as a rubber in 
a Turkish bath. Michael I. Pupin was graduated 
from Columbia, studied afterward in Germany, and 
became absorbed in the new subject of electro- 
mechanics. In particular he became interested in 
a telephone problem that had bothered the greatest 


104 THE AGE OF BIG BUSINESS 


experts for years. One thing that had prevented 
the great extension of the telephone, especially for 
long distance work, was the size of the wire. Long 


distance lines up to 1900 demanded wire about 
one-eighth of an inch thick — as thick as a fair- 
sized lead pencil; and, for this reason, the New 
York-—Chicago line, built in 1893, consumed 870,000 
pounds of copper wire of this size. Naturally the 
enormous expense stood in the way of any extended | 
development. The same thickness also interfered 
with cable extension. Only about a hundred wires” 


could be squeezed into one cable, against the eight- 
een hundred now compressed in the same area. 
Because of these shortcomings, telephone progress, | 
about 1900, was marking time, awaiting the arrival | 
of a thin wire that would do the work of a thick one. | 
The importance of the problem is shown by the 
fact that one-fourth of all the capital invested in 
the telephone has been spent in copper. Professor 
Pupin, who had been a member of the faculty of 
Columbia University since 1888, solved this prob- 
lem in his quiet laboratory and, by doing so, won 
the greatest prize in modern telephone art. His 
researches resulted in the famous “Pupin coil” by 
the expedient now known as “loading.”” When 
the scientists attempt to explain this invention, 


THE TELEPHONE . 105 


they have to use all kinds of mathematical formulas 
and curves and, in fact, they usually get to quarrel- 
ing among themselves over the points involved. 
What Professor Pupin has apparently done is to 
free the wire from those miscellaneous disturbances 
known as “induction. ’ 
volved another improvement unsuspected by the 


> 


This Pupin invention in- 


inventor, which shows us the telephone in all its 
mystery and beauty and even its sublimity. Soon 
after the Pupin coil was introduced, it was discov- 
ered that, by crossing the wires of two circuits at 
regular intervals, another unexplainable circuit 
was induced. Because this third circuit travels 
apparently without wires, in some manner which 
the scientists have not yet discovered, it is appro- 
priately known as the phantom circuit. The prac- 
tical result is that it is now possible to send three 
telephone messages and eight telegraph messages 
over two pairs of wires — all at the same time. 
Professor Pupin’s invention has resulted in econo- 
mies that amount to millions of dollars, and has 
made possible long distance lines to practically 
every part of the United States. 

Thus many great inventive minds have produced 
the physical telephone. We can point to several 
men — Bell, Blake, Carty, Scribner, Barrett, Pupin 


106 | THE AGE OF BIG BUSINESS 


—and say of each one, “Without his work the 
present telephone system could not exist.” But 
business genius, as well as mechanical genius, ex- 
plains this achievement. For the first four or five 
years of its existence, the new invention had hard 
sailing. Bell and Thomas Watson, in order to for- 
tify their finances, were forced to travel around 


the country, giving a kind of vaudeville entértain- 
ment. Bell made a speech explaining the new in- 
vention, while a cornet player, located in another 
part of the town, played solos, the music reach- 
ing the audience through several telephone in- 
struments placed against the walls. Watson, also 
located at a distance, varied the program by sing- 
ing songs via telephone. These lecture tours not 
only gave Bell the money which he sorely needed 
but advertised the innovation. There followed a 
few scattering attempts to introduce the telephone 
into every-day use and telephone exchanges were 
established in New York, Boston, Bridgeport, and 
New Haven. But these pioneers had the hostility 
of the most powerful corporation of the day — the 
Western Union Telegraph Company — and they 
lacked aggressive leaders. | 

In 1878, Mr. Gardiner Hubbard, Bell’s earli- 
est backer, and now his father-in-law, became 


> 


THE TELEPHONE 107 


lacquainted with a young man who was then serv- 
ing in Washington as General Superintendent of 
the Railway Mail Service. This young man was 
Theodore N. Vail. His energy and enterprise so 
impressed Hubbard that he immediately asked 
Vail to become General Manager of the company 
which he was then forming to exploit the telephone. 
Viewed from the retrospection of forty years this 
offer certainly looks like one of the greatest prizes 
in American business. What it signified at that 
time, however, is apparent from the fact that the 
office paid a salary of $3500 a year and that for the 
first ten years Vail did not succeed in collecting a 


dollar of this princely remuneration. Yet it wasa 
happy fortune, not only for the Bell Company but 
for the nation, that placed Vail at the head of this 
struggling enterprise. There was a certain appro- 
priateness in his selection, even then. His grand- 
uncle, Stephen Vail, had built the engines for the 
first steamship to cross the Atlantic. A cousin had 
worked with Morse while he was inventing the tele- 
graph. Vail, who was born in Carroll County, Ohio, 
in 1845, after spending two years as a medical stu- 
dent, suddenly shifted his plans and became a tele- 
graph operator. Then he entered the Railway Mail 
service; in this service he completely revolutionized 


~ 


108 THE AGE OF BIG BUSINESS 


the system and introduced reforms that exist at 
the present time. A natural bent had apparently 
directed Vail’s mind towards methods of com. 
munication, a fact that may perhaps explain the 
youthful enthusiasm with which he took up the 
new venture and the vision with which he foresaw 
and planned its future. For the chief fact about 
Vail is that he was a business man with an imagi- 


nation. The crazy little machine which he now 
undertook to exploit did not interest him as a 
means of collecting tolls, floating stock, and paying 
dividends. He saw in it anew method of spread- 
ing American civilization and of contributing to 
the happiness and comfort of millions of people. 
Indeed Vail had hardly seen the telephone when a 
picture portraying the development which we are 
familiar with today unfolded before his eyes. That 
the teiephone has had a greater development in 
America than elsewhere and that the United States 
has avoided all those mistakes of organization that 
have so greatly hampered its growth in other lands, 
is owing to the fact that Vail, when he first took 
charge, mapped out the comprehensive policies 
which have guided his corporation since. 

Vail early adopted the “slogan” which has di- 
rected the Bell activities for forty years — “‘One 


THE TELEPHONE 109 


Bystem! One Policy! Universal Service.” In his 
ind a telephone company was not a city affair, 


r even a state affair; it was a national affair. His 
im has been from the first a universal, national 
rvice, all under one head, and reaching every 
let, every business house, factory, and home 
the nation. The idea that any man, anywhere, 
jhould be able to take down a receiver and talk to 
y one, anywhere else in the United States, was the 
mception which guided Vail’s labors from the first. 
e did not believe that a mass of unrelated com- 
anies could give a satisfactory service; if cireum- 
stances had ever made a national monopoly, that 
monopoly was certainly the telephone. Having in 
view this national, universal, articulating monop- 
oly, Vail insisted on his second great principle, 
the standardization of equipment. Every man’s 
telephone must be precisely like every other man’s, 
and that must be the best which mechanical skill 
and inventive genius could produce. Tomake this 
a reality and to secure perfect supervision and up- 
keep, it was necessary that telephones should not 
be sold but leased. By enforcing these ideas Vail 
saved the United States from the chaos which ex- 
ists in certain other countries, such as France, where 
each subscriber purchases his own instrument, 


110 THE AGE OF BIG BUSINESS 


making his selection from about forty different 
varieties. That certain dangers were inherent in 
this universal system Vail understood. Monop- 
oly all too likely brings in excessive charges, poor 
service, and inside speculation; but it was Vail’s 
plan to justify his system by its works. To this 
end he established a great engineering department 
which should study all imaginable mechanical im- 
provements, with the results which have been de- 
scribed. He gave the greatest attention to every 
detail of the service and particularly insisted on the 
fairest and most courteous treatment of the public, 
The “please” which invariably accompanies the 
telephone girl’s request for a number — the fa- 


miliar “‘number, please” —is a trifle, but it epito- 
mizes the whole spirit which Vail inspired through- 
out his entire organization. Though there are 
plenty of people who think that the existing 
telephone charges are too high, the fact remains 
that the rate has steadily declined with the exten- 
sion of the business. Vail has also kept his com- 
pany clear from the financial scandals that have 
disgraced so many other great corporations. He 
has never received any reward himself except his 
salary, such fortune as he possesses being the result 
of personal business ventures in South America 


tS 


o 


: THE TELEPHONE 111 
during the twenty years from 1887 to 1907 that 


he was not associated with the Bell interests. 

_ Vail’s first achievement was to rescue this in- 
vention from the greatest calamity which would 
have befallen it. The Western Union Telegraph 
Company, which in the early days had looked upon 
the telephone as negligible, suddenly awoke one 
morning to a realization of its importance. This 
sorporation had recently introduced its “printing 
telegraph,” a device that made it possible to 
sommunicate without the intermediary operator. 
When news reached headquarters that subscribers 
were dropping this new contrivance and subscrib- 
ing to telephones, the Western Union first un- 
derstood that a competitor had entered their 
ield. Promptly organizing the American Speaking 
Telephone Company, the Western Union, with all 
its wealth and prestige, proceeded to destroy this 
msolent pigmy. Its methods of attack were un- 
scrupulous and underhanded, the least discredit- 
able one being the use of its political influence to 
prevent communities from giving franchises to the 
Bell Company. But this corporation mainly relied 
for success upon the wholesale manner in which it 
mfiringed the Bell patents. It raked together all 
dossible claimants to priority, from Philip Reis 


112 THE AGE OF BIG BUSINESS 


to Elisha Gray, in its attempts to discredit Bell 
as the inventor. The Western Union had onh 
one legitimate advantage —the Edison transmit 
ter — which was unquestionably much superior t ; 
anything which the Bell Company then possessed, 
Many Bell stockholders were discouraged in face of 
this fierce opposition and wished to abandon 
fight. Not so Vail. The mere circumstance that 
the great capitalists of the Western Union had 


taken up the telephone gave the public a confidence 
in its value which otherwise it would not have had, 
a fact which Vail skillfully used in attracting i 
fluential financial support. He boldly sued the 
Western Union in 1878 for infringement of the Bell 
patents. The case was a famous one; the whole 
history of the telephone was reviewed from the 
earliest days, and the evidence as to rival claimants 
was placed on record for all time. After about a 
year, Mr. George Gifford, perhaps the best patent 
attorney of the day, who was conducting the case 
for the Western Union, quietly informed his clien ts 
that they could never win, for the records showed 
that Bell was the inventor. He advised the West 
ern Union to settle the case out of court and his 
advice was taken. This great corporation war was 
concluded by a treaty (November 10, 1879) in 


THE TELEPHONE 113 


which the Western Union acknowledged that Bell 
vas the inventor, that his patents were valid, and 
igreed to retire from the telephone business. The 
3ell Company, on its part, agreed to buy the West- 
mm Union Telephone System, to pay the Western 
Jnion a royalty of twenty per cent on all telephone 
entals, and not to engage in the telegraph busi- 
uess. Had this case been decided against the Bell 
Sompany it is almost certain that the telephone 
vould have been smothered in the interest of the 
elegraph and its development delayed for many 
years. 

Soon after the settlement of the Western Union 
uit, the original group which had created the tele- 
hone withdrew from the scene. Bell went back to 
eaching deaf-mutes. He has since busied himself 
vith the study of airplanes and wireless, and has 
nvented an instrument for transmitting sound by 
ight. The new telephone company offered him 
10,000 a year as chief inventor, but he replied that 
ie could not invent to order. Thomas Sanders re- 
eived somewhat less than $1,000,000 and lost most 
f it exploiting a Colorado gold mine. Gardiner 
dubbard withdrew from business and devoted the 
ast years of his life to the National Geographic 


iety. Thomas Watson, after retiring from the 
8 


114 THE AGE OF BIG BUSINESS 


telephone business, bought a ship-building yard 
near Boston, which has been successful. 

In making this settlement with the Western 
Union, the Bell interests not only eliminated a 
competitor but gained great material advantages. 
They took over about 56,000 telephone stations 
located in 55 cities and towns. They also soon ace 
quired the Western Electric Manufacturing Com- 
pany, which under the control of the Western 
Union had developed into an important concern 
for the manufacture of telephone supplies. Un- 
der the management of the Bell Company this 
corporation, which now has extensive factories in 
Hawthorne, IIl., produces two-thirds of the world’s 
telephone apparatus. With the Western Electric 
Vail has realized the fundamental conception un- 
derlying his ideal telephone system — the stand- 
ardization of equipment. For the accomplishment 
of his idea of a national telephone system, instead 
of a parochial one, Mr. Vail organized, in 1881, the 
American Bell Telephone Company, a corporation 
that really represented the federalization of all the 
telephone activities of the subsidiary companies. 
The United States was divided into several sections, 
in each of which a separate company was organ- 
ized to develop the telephone possibilities of that 


y 


i. 
- 


THE TELEPHONE 115 


particular area. In 1899 the American Telephone 
and Telegraph Company took over the business and 
properties of the American Bell Company. The 
larger corporation built toll lines, connected these 
smaller systems with one another, and thus made it 
possible for Washington to talk to New York, New 
York to Chicago, and ultimately — Boston to San 
Francisco. An enlightened policy led the Bell Com- 
pany frequently to establish exchanges in places 
where there was little chance of immediate profit. 
Under this stimulation the use of this instrument 
extended rapidly, yet it is in the last twenty 
years that the telephone has grown with accel- 
erated momentum. In 1887 there were 170,000 
subscribers in the United States, and in 1900 
there were 610,000; but in 1906 the American 
Telephone and Telegraph Company was furnishing 
its service to 2,550,000 stations, and in 1916 to 
10,000,000. Clearly it is only since 1900 that the 
telephone has become a commonplace of American 
existence. Up to 1900 it had grown at the rate of 
about 13,000 a year; whereas since 1900 it has 
grown at the rate of 700,000a year. The explana- 
tion is that charges have been so reduced that the 
telephone has been brought within the reach of 
practically every business house and every family. 


116 THE AGE OF BIG BUSINESS 


Until the year 1900 every telephone subscriber had 
to pay $240 a year, and manifestly only families in 
affluent circumstances could afford such a luxury, 
About that time a new system of charges known as 
the “message rate” plan was introduced, according 
to which the subscriber paid a moderate price for a 
stipulated number of calls, and a pro rata charge 
for all calls in excess of that number. Probably 
no single change in any business has had such an 
instantaneous effect. The telephone, which had 
hitherto been an external symbol of prosperity, 


suddenly became the possession of almost ie | 
citizen. 

Other companies than the Bell interests havi 
participated in this development. The only time 
the Bell Company has had no competitor, Mr. Vail 
has said, was at the Philadelphia Centennial in 
1876. Some of this competition has benefited the 
public but much of it has accomplished little except 
to enrich many not over-scrupulous promoters. 
Groups of farmers who frequently started com- 
panies to furnish service at cost did much to extend 
the use of the telephone. Many of the companies 
which, when the Bell patents expired in 1895, 
sprang up in the Middle West, also manifested 
great enterprise and gave excellent service. These 


THE TELEPHONE 117 


sompanies have made valuable contributions, of 
vhich perhaps the automatic telephone, an instru- 
nent which enables a subscriber to call up his 
‘party”’ directly, without the mediation of “‘cen- 
ral,” is the most ingenious. Although due ac- 
mnowledgment must be made of the honesty and 
nterprise with which hundreds of the independ- 
nts are managed, the fact remains that they area 
reat economic waste. Most of them give only a 
ocal service, no company having yet arisen which 
ims to duplicate the comprehensive national plans 
yf the greater corporation. As soon as an inde- 
yendent obtains a foothold, the natural consequence 
s that every business house and private household 
ust either be contented with half service, or 


ouble the cost of the telephone by subscribing to 
wocompanies. It isnot unlikely that the “inde- 
endents” have exercised a wholesome influence 
pon the Bell Corporation, but, as the principle of 
overnment regulation rather than individual com- 
etition has now become the established method of 
ontrolling monopoly, this influence will possess 
svirtueinthefuture. In addition to these inde- 
endent enterprises, the telephone has unfortu- 
ately furnished an opportunity for stock-jobbing 
hemes on a considerable scale. The years from 


118 THE AGE OF BIG BUSINESS | 


1895 to 1905 witnessed the growth of many bubbles 
of this kind; one group of men organized not 
far from two hundred telephone companies. They 
would go into selected communities, promise a su- 
perior service at half the current rates, enlist the 
codperation of “leading” business men, sell the 
stock largely in the city or town to be benefited, 
make large profits in the construction of the lines 
and the sale of equipment — and then decamp for 
pastures new. The multitudinous bankruptcies 
that followed in the wake of such exploiters at 
length brought their activities to an end. \ 


| 
| 


CHAPTER V 
THE DEVELOPMENT OF PUBLIC UTILITIES 


[HE streets of practically all American cities, as 
they appeared in 1870 and as they appear today, 
present one of the greatest contrasts in our indus- 
rial development. Fifty years ago only a few 
flickering gas lamps lighted the most traveled 
thoroughfares. Only the most prosperous business 
houses and homes had even this expensive illumin- 
ation; most obtained their artificial light from the 
new illuminant known askerosene. Butit was the 
mechanism of city transportation that would have 
looked the strangest in our eyes. New York City 
had built the world’s first horse-car line in 1832, and 
since that year this peculiarly American contriv- 
ance has had the most extended development. In 
1870, indeed, practically every city of any impor- 
tance had one or more railways of this type. New 
York possessed thirty different companies, each 


operating an independent system. In Philadelphia, 
: 119 


120 THE AGE OF BIG BUSINESS 


physical specimens of their breeds, furnished 


motive power. The cars were little “bobtailed” 
receptacles, usually badly painted and more often 
than not in a desperate state of disrepair. 
many cities the driver presided as a solitary auto- 


ing passengers warmed themselves by pulling their 
coat collars and furs closely about their necks and 
thrusting their lower members into a heap of straw, 
piled almost a foot deep on the floor. 

Who would have thought, forty years ago, that 
the lighting of these dark and dirty streets and the 
modernization of these local railway systems would 
have given rise to one of the most astoundi ng 


PUBLIC UTILITIES 121 


shapters in our financial history and created hun- 
dreds, perhaps thousands, of millionaires? When 
Thomas A. Edison invented the incandescent light, 
d when Frank J. Sprague in 1887 constructed the 
first practicable urban trolley line, in Richmond, 
irginia, they liberated forces that powerfully af- 
ted not only our social and economic life but our 
political institutions. These two inventions intro- 
uced a new phrase — “Public Utilities.”” Com- 
ined with the great growth and prosperity of the 
cities theyfurnished a fruitful opportunity to several 
icularly famous groups of financial adventurers. 
They led to the organization of “‘syndicates”’ which 
devoted all their energies, fora quarter of acentury, 
to exploiting city lighting and transportation sys- 
tems. These syndicates made a business of enter- 
ing city after city, purchasing the scattered street 
railway lines and lighting companies, equipping 
them with electricity, combining them into unified 
systems, organizing large corporations, and float- 
ing huge issues of securities. A single group of six 
men — Yerkes, Widener, Elkins, Dolan, Whitney, 
and Ryan — combined the street railways, and 
in many cases the lighting companies, of New 
York, Philadelphia, Chicago, Pittsburgh, and at 
least a hundred towns and cities in Pennsylvania, 


122 THE AGE OF BIG BUSINESS 


Connecticut, Rhode Island, Massachusetts, Ohio 
Indiana, New Hampshire, and Maine. KEither 
jointly or separately they controlled the gas and 
electric lighting companies of Philadelphia, Read- 
ing, Harrisburg, Atlanta, Vicksburg, St. Augustine, 
Minneapolis, Omaha, Des Moines, Kansas — 
Sioux City, Syracuse, and about seventy other 


communities. A single corporation developed 
nearly all the trolley lines and lighting companies 
of New Jersey; another controlled similar utilities 
in San Francisco and other cities on the Pacific 
Coast. In practically all instances these syndi- 
cates adopted precisely the same plan of operation. 


In so far as their activities resulted in cheap, com= 
fortable, rapid, and comprehensive transit systems" 
and low-priced illumination, their activities greatly 
benefited the public. The future historian of 
American society will probably attribute enormous 
influence to the trolley car in linking urban com=- 
munity with urban community, in extending the 
radius of the modern city, in freeing urban workers 
from the demoralizing influences of the tenemen : 
in offering the poorer classes comfortable homes in” 
the surrounding country, and in extending general 
enlightenment by bringing about a closer human 
intercourse. Indeed, there is probably no single 


PUBLIC UTILITIES 128 


influence that has contributed so much to the pleas- 
ure and comfort of the masses as the trolley car. 

Yet the story that I shall have to tell is not a 
pleasant one. It is impossible to write even a 
brief outline of this development without plung- 
ing deeply into the two phases of American life of 
which we have most cause to be ashamed; these are 
American municipal politics and the speculative 
aspects of Wall Street. The predominating in- 
fluences in American city life have been the great 
franchise corporations. Practically all the men 
that have had most to do with developing our 
public utilities have also had the greatest influence 
in city politics. In New York, Thomas F. Ryan 
and William C. Whitney were the powerful, though 
visible, powers in Tammany Hall. In Chicago, 
Charles T. Yerkes controlled mayors and city 
councils; he even extended his influence into the 
state government, controlling governors and leg- 
islatures. In Philadelphia, Widener and Elkins 
dominated the City Hall and also became part of 
the Quay machine of Pennsylvania. Mark Hanna, 
the most active force in Cleveland railways, was 
also the political boss of the State. Roswell P. 
Flower, chief agent in developing Brooklyn Rapid 
Transit, had been Governor of New York; Patrick 


. 
| 


124. THE AGE OF BIG BUSINESS 


Calhoun, who monopolized the utilities of San 
Francisco and other cities, presided likewise ovet 
the city’s inner politics. The Public Service Cor- 
poration of New Jersey also comprised a large 
political power in city and state politics. It is 
hardly an exaggeration to say that in the most ac. 
tive period, that from 1880 to 1905, the powers 
that developed city railway and lighting companies 
in American cities were identically the same owners 
that had the most to do with city government. In 


the minds of these men politics was necessarily ag 


much a part of their business as trolley poles and 
steel rails. This type of capitalist existed only on 
public franchises — the right to occupy the public 
streets with their trolley cars, gas mains, and elec 
tric light conduits; they could obtain these privi- 
leges only from complaisant city governments, and 
the simplest way to obtain them was to control 
these governments themselves. Herein we have 
the simple formula which made possible one of the 
most profitable and one of the most adventurous 
undertakings of our time. 

An attempt to relate the history of all these 
syndicates would involve endless repetition. If 
we have the history of one we have the history 
of practically all. I have therefore selected, as 


PUBLIC UTILITIES 125 


ical, the operations of the group that devel- 
oped the street railways and, to a certain extent, 
e public lighting companies, in our three great- 
est American cities — New York, Chicago, and 
Philadelphia. 
_ One of the men who started these enterprises ac- 
tually had a criminal record. William H. Kem- 
ble, an early member of the Philadelphia group, had 
been indicted for attempting to bribe the Penn- 
sylvania Legislature; he had been convicted and 
sentenced to one year in the county jail and had 
escaped imprisonment only by virtue of a pardon 
pbtained through political influence. Charles T. 
Yerkes, one of his partners in politics and street 
railway enterprises, had been less fortunate, for he 
had served seven months for assisting in the em- 
bezzlement of Philadelphia funds in 1873. It was 
this circumstance in Yerkes’s career which impelled 
him to leave Philadelphia and settle in Chicago 
where, starting as a small broker, he ultimately ac- 
quired sufficient resources and influence to embark 
in that street railway business at which he had al- 
ready served an extensive apprenticeship. Under 
lis domination, the Chicago aldermen attained a 
depravity that made them notorious all over the 
world. They openly sold Yerkes the use of the 


. 


ey 


126 THE AGE OF BIG BUSINESS ; 
streets for cash and constantly blocked the efforts 
which an infuriated populace made for reform, 


Yerkes purchased the old street railway lines, lined 


his pockets by making contracts for their recon- 
struction, issued large flotations of watered stock, 
heaped securities upon securities and reorganiza- 
tion upon reorganization and diverted their assets. 
to business in a hundred ingenious ways. { 
In spite of the crimes which Yerkes perpetrated 
in American cities, there was something refreshing 
and ingratiating about the man. Possibly this is 
because he did not associate any hypocrisy with 
his depredations. ‘“‘The secret of success in my 
business,’’ he once frankly said, “‘is to buy old 
junk, fix it up a little, and unload it upon other | 
fellows.”’ Certain of hisepigrams— such as, “It is 
the strap-hanger who pays the dividends” — have 
likewise given him a genial immortality. The fact 
that, after having reduced the railway system of 
Chicago to financial pulp and physical dissolution, — 
he finally unloaded the whole useless mass, at a 
handsome personal profit, upon his old New York 
friends, Whitney and Ryan, and decamped to Lon- 
don, where he carried through huge transit en- 
terprises, clearly demonstrated that Yerkes was a 


buccaneer of no ordinary caliber. 


PUBLIC UTILITIES 127 


_ Yerkes’s difficulties in Philadelphia indirectly 
made possible the career of Peter A. B. Widener. 
For Yerkes had become involved in the defalcation 
of the City Treasurer, Joseph P. Mercer, whose 
translation to the Eastern Penitentiary left vacant 
a municipal office into which Mr. Widener now 
promptly stepped. Thus Mr. Widener, as is prac- 
tically the case with all these street railway mag- 
nates, was a municipal politician before he became 
‘a financier. The fact that he attained the city 
treasurership shows that he had already gone far, 
for it was the most powerful office in Philadelphia. 
He had all those qualities of suavity, joviality, 
firmness, and personal domination that made pos- 
sible success in American local politics a generation 
ago. His occupation contributed to his advance- 
ment. In recent years Mr. Widener, as the owner 
of great art galleries and the patron of philanthrop- 
ic and industrial institutions, has been a national 
figure of the utmost dignity. Had you dropped 
into the Spring Garden Market in Philadelphia 
forty years ago, you would have found a portly 
gentleman, clad in a white apron, and armed with 
a cleaver, presiding over a shop decorated with 
“the design — “Peter A. B. Widener, Butcher.” He 
was constantly joking with his customers and 


128 THE AGE OF BIG BUSINESS 


visitors, and in the evening he was accustomed t 
foregather with a group of well-chosen spirits who 
had been long famous in Philadelphia as the “all- 
night poker players.”’ A successful butcher shop 
in Philadelphia in those days played about 


a political clique; and so Widener, the son of a 
poor German bricklayer, rapidly became a political 


leader in the Twentieth Ward, and soon found his 
M 


ference of all the Metropolitan’s visible assets to 
a company of which the stockholders knew noth- 
ing. When several of these stockholders arose 


‘a 


to discuss the projected lease, Widener turned to 
them and said, in his politest and blandest man- 


ner: “You can vote first and discuss afterward.” 


and demanded that they be given an opportunit 


Widener displayed precisely these same qualities of 
ingratiating arrogance and good-natured contempt | 
as a Philadelphia politician. He was a man of 
big frame, alert and decisive in his movements, 


PUBLIC UTILITIES 128 


land a ready talker; in business he was given much 
to living in the clouds— a born speculator — em- 
phatically a “boomer.” His sympathies were gen- 
erous, at times emotional; it is said that he has 
even been known to weep when discussing his fine 
collection of Madonnas. He showed this personal 
side in his lifelong friendship and business associa- 
tion with William L. Elkins, a man much inferior 
[to him in ability. Indeed, Elkins’s great fortune 
was little more than a free gift from Widener, who 
earried him as a partner in all his deals. Elkins 
became Widener’s bondsman when the latter en- 
tered the City Treasurer’s office; the two men lived 
near each other on the same street, and this asso- 
ciation was cemented when Widener’s oldest son 
married Elkins’s daughter. Elkins had started life 
as an entry clerk in a grocery store, had made 
money in the butter and egg business, had “‘struck 
oil”’ at Titusville in 1862, and had succeeded in ex- 
changing his holdings for a block of Standard Oil 
stock. He too became a Philadelphia politician, 
but he had certain hard qualities — he was close- 
fisted, slow, plodding — that prevented him from 
achieving much success. 

For the other members of this group we must now 
ehange the scene to New York City. In the early 


? 


/ le 


130 THE AGE OF BIG BUSINESS 


eighties certain powerful interests had formed plans 
for controlling the New York transit fields. Promi- 
nent among them was William Collins Whitney, a 
very different type of man from the Philadelphians. 


Born in Conway, Massachusetts, in 1841, he came 
from a long line of distinguished and intellectual 
New Englanders. At Yale his wonderful mental. 
gifts raised him far above his fellows; he divided all 


scholastic honors there with his classmate, William 


Graham Sumner, afterwards Yale’s great political 
economist. Soon after graduation Whitney came 
to New York and rapidly forged ahead as a lawyer. 
Brilliant, polished, suave, he early displayed those | 


qualities which afterward made him the masta 


mind of presidential Cabinets and the maker of, 
American Presidents. Physically handsome, loved 
by most men and all women, he soon acquired a 
social standing that amounted almost to a dictator- 1 
ship. His early political activities had greatly bene- 
fited New York. Hebecame a member of thatgroup 
which, under the leadership of Joseph H. Choate 
and Samuel J. Tilden, accomplished the downfall 
of William M. Tweed. Whitney remained Tilden’st 


political protégé for several years. Though high- 


; 


bred and luxury-loving, as a young man he was 
not averse to hard political work, and many 


é 


iy 


} 


PUBLIC UTILITIES 131 


bld-timers still remember the days when “Bill” 
Whitney delivered cart-tail harangues on the lower 
east side. By 1884 he had become the most prom- 
inent Democrat in New York — always a foe to 
Tammany — and as such he contributed largely to 
Cleveland’s first election, became Secretary of the 
Navy in Cleveland’s cabinet and that great Presi- 
dent’s close friend and adviser. As Secretary of 
the Navy, Whitney, who found the fleet composed 
of a few useless hulks left over from the days of 
Farragut, created the fighting force that did such 
efficient service in the Spanish War. The fact 
that the United States is now the third naval 
power is largely owing to these early activities of 
Whitney. 

Certainly all this national service forms a strange 
prelude to Whitney’s activities in the public 
utilities of New York and other cities. Had he 
died, indeed, in his fiftieth year, his name would 
be renowned today as a worker for the highest 
ideals of American citizenship. What suddenly 
made him turn his back upon his past, join his 
former enemies in Tammany Hall, and engage 
im these great speculative enterprises? The 
‘simplest explanation is that, with his ability and 
‘ambition, Whitney had the luxurious tastes of a 


132 THE AGE OF BIG BUSINESS 


Medici. At the height of his career his financial 
success found expression in a magnificent house 
which he established on Fifth Avenue. Its furnish- 
ings were one of the wonders of New York. Whit- 
ney ransacked the art treasures of Europe, stripped 


medieval castles of their carvings and tapestries, 
ripped whole staircases and ceilings from the repose _ 
of centuries, and relaid them in this abode of splen- | 
dor, and here he entertained with a lavishness that 
astounded New York. This single exploit pictures" 
the man. Everything that Whitney did and was 
—his house, his financial transactions, his Wall. 
Street speculations, the rewards which he gave his 
friends — assumed heroic proportions. But these 
things all demanded money. The dilapidated — 


horse railways of New York offered him his most 
& 


convenient opportunity for amassing it. 
But Whitney had not proceeded far when he 
came face to face with a quiet and energetic young . 
man who had already made considerable progress ~ 
in the New York transit field. This was a Virs 
ginian of South Irish descent who had started life 
as a humble broker’s clerk twelve or fourteen years” 
before. His name was Thomas Fortune Ryan. 
Few men have wielded greater power in Ameri- 
can finance, but in 1884 Ryan was merely a 


PUBLIC UTILITIES 133 


ruddy-faced, clean-cut, and clean-living Irishman 
thirty-three, who could be depended on to exe- 
Bate quickly and faithfully orders on the New York 
Stock Exchange — even though they were small 
lones — and who, in unostentatious fashion, had 
already acquired much influence in Tammany Hall. 
With his six feet of stature, his extremely slender 
figure, his long legs, his long arms, his raiment — 
| which always represented the height of fashion and 
| tended slightly toward the flashy — Ryan made 
|a@ conspicuous figure wherever he went. He was 
born in 1851, on a small farm in Nelson County, 
Virginia. The Civil War, which broke out when 
Ryan was a boy of ten, destroyed the family for- 
tune and in 1868, when seventeen, he began life 
as a dry-goods clerk in Baltimore, fulfilling the 
tradition of the successful country boy in the large 
city by marrying his employer’s daughter. When 
his father-in-law failed, in 1870, Ryan came to 
New York, went to work in a broker’s office, and 
‘succeeded so well that, in a few years, he was able 
to purchase a seat on the Stock Exchange. He 
was sufficiently skillful as a broker to number Jay 
Gould among his customers and to inspire a proph- 
ecy by William C. Whitney that, if he retained 
his health, he would become one of the richest men 


134 THE AGE OF BIG BUSINESS 


in the country. Afterwards, when he knew him 
more intimately, Whitney elaborated this esti- 
mate by saying that Ryan was “the most adroit, 
suave, and noiseless man he had ever known.” 
Ryan had two compelling traits that soon won 


for him these influential admirers. First of all was. 


his marvelous industry. His genius was not spas-_ 
modic. He worked steadily, regularly, never losing. 


a moment, never getting excited, going, day after 
day, the same monotonous dog-trot, easily outdis-_ 
tancing scores of apparently stronger men. He 
also had the indispensable faculty of silence. He 
has always been the least talkative man in Wall — 
Street, but, with all his reserve, he has remained | 
the soul of courtesy and outward good nature. | 
Here, then, we have the characters of this great | 
impending drama — Yerkes in Chicago, Widener — 
and Elkins in Philadelphia, Whitney and Ryan in — 
New York. These five men did not invariably 
work as a unit. Yerkes, though he had consider- 
able interest in Philadelphia, which had been the 
scene of his earliest exploits, limited his activities 
largely to Chicago. Widener and Elkins, however, — 
not only dominated Philadelphia traction but 
participated in all of Yerkes’s enterprises in Chi- 
cago and held an equal interest with Whitney and 


’ 


4 

} PUBLIC UTILITIES 135 
‘Ryan in New York. The latter Metropolitan pair, 
though they confined their interest chiefly to their 
own city, at times transferred their attention to 
Chicago. Thus, for nearly thirty years, these five 
men found their oyster in the transit systems of 
America’s three greatest cities — and, for that 
matter, in many others also. 

An attempt to trace the convolutions of Amer- 
ica’s street railway and public lighting finance 
would involve a puzzling array of statistics and an 
inextricable complexity of stocks, bonds, leases, 
holding companies, operating companies, construc- 
tion companies, reorganizations, and the like. 
Difficult and apparently impenetrable as is this 
financial morass, the essential facts still stand out 
plainly enough. As already indicated, the funda- 
mental basis upon which the whole system rested 
was the control of municipal politics. Thestory 
of the Metropolitan’s manipulation of the New 
York street railways starts with one of the most 
sordid episodes in the municipal annals of Amer- 
ica’s largest city. Somewhat more than thirty 
years ago, a group of New York city fathers ac- 

quired an international fame as the “boodle alder- 
men.” These men had finally given way to the im- 
portunities of a certain Jacob Sharp, an eccentric 


136 THE AGE OF BIG BUSINESS 


New York character, who had for many years 
operated New York City railways, and granted 
franchise for the construction of a horse-car line 
on lower Broadway. Soon after voting this fran-_ 
chise, regarded as perhaps the most valuable in 
the world, these same aldermen had begun to 
wear diamonds, to purchase real estate, and sive 
other outward evidences of unexpected prosper- j 
ity. Presently, however, these city fathers ae 
a migration to Canada, Mexico, Spain, and other | 
countries where the processes of extradition did 
not work smoothly. Sharp’s enemies had suc-_ 
ceeded in precipitating a legislative investigation 
under the very capable leadership of Roscoe Conk-— 
ling, who had little difficulty in showing that Sharp 
had purchased his aldermen for $500,000 cash. In 
a short time, such of the aldermen as were ac-_ 


cessible to the police were languishing in prison, 

and Sharp had been arrested on twenty-one —— 
ments for bribery and sentenced to four years’ 
hard labor — a sentence which he was saved from 
serving by his lonely and miserable death in Lud-— 
low Street Jail. In the delirium preceding his 
dissolution Sharp raved constantly about his ; 
Broadway railroad and his enemies; it was ap- 
parently his belief that the investigation which had — 


PUBLIC UTILITIES 137 


uncovered his rascality and the subsequent “per- 
| secutions” had been engineeréd by certain of his 
| rivals, either to compel Sharp to disgorge his fran- 
chise or to produce the facts that would jus- 
tify the legislature in annulling it on the ground 
of fraud. 

Though the complete history of this transaction 
‘can never be written, we do possess certain facts 
that lend some color to this diagnosis. Up to the 
time that Sharp had captured this franchise, Ryan, 
Whitney, and the Philadelphians — not as part- 
ners, but as rivals — had competed with him for 
this prize. At the trial of Arthur J. McQuade in 
1886, a fellow conspirator, who bore the somewhat 
‘suggestive name of Fullgraff, related certain details 
which, if true, would indicate that Sharp’s methods 
differed from those of his rivals only in that they 
had proved more successful. Thirteen members of 
the Board of Aldermen, said Fullgraff, had formed 
a close corporation, elected a chairman, and 
adopted a policy of “business unity in all important 
matters,’ which meant that they proposed to keep 
together in order to secure the highest price for the 
Broadway franchise. The cable railroad, which 
was the one with which Mr. Ryan was identified, 
offered $750,000, half in bonds and half in cash. 


138 THE AGE OF BIG BUSINESS 


Mr. Sharp, however, offered $500,000 all in cash, 
The aldermen voted in favor of Sharp because cash 
was not only a more valuable commodity than tHe 
bonds but, to use Alderman Fullgraff’s own words 
— “less easily traced.” That Whitney financed 
lawsuits against the validity of Sharp’s franchise 
appears upon the record, and that Ryan was ac- 
tively promoting the Conkling investigation, is 
likewise a matter of evidence. Sharp’s victory had | 
the great result of bringing together the three forces. 
—Ryan, Whitney, and the Philadelphians — who 
had hitherto combated one another as rivals; that, 
is, it caused the organization of the famous Whit- 
ney-Ryan-Widener-Elkins syndicate. If these 
men had inspired all those attacks on Sharp, their , 
maneuver proved successful; for when the investi- | 
gation had attained its climax and public indigna- 
tion against Sharp had reached its most furious” 
stage, that venerable corruptionist, worn down by 
ill health, and almost crazed by the popular outcry, 
sold his Broadway railroad to Peter A. B. Wide- 
ner, William L. Elkins, and William H. Kemble. 
Thomas F. Ryan became secretary of the new 
corporation, and William C. Whitney an active 
participant in its affairs. 

This Broadway franchise formed the vertebral 


PUBLIC UTILITIES 139 


column of the New York transit system; with it 
las a basis, the operators formed the Metropoli- 
tan Street Railway Company in 1893, commonly 
known as the “Metropolitan.” 
also the Metropolitan Traction Company, an or- 


They organized 


ganization which enjoys an historic position as the 
first “holding company’”’ ever created in this coun- 
try. Its peculiar attribute was that it did not con- 
struct and operate street railways itself, but merely 
owned other corporations that did so. Its only 
assets, that is, were paper securities representing 
the ownership and control of other companies. 
This “holding company,” which has since become 
almost a standardized form of corporation control 
in this country, was the invention of Mr. Francis 
Lynde Stetson, one of America’s greatest corpo- 
ration lawyers. “Mr. Stetson,”’ Ryan is said to 
have remarked, ‘“‘do you know what you did when 
you drew up the papers of the Metropolitan Trac- 
tion Company? You made us a great big tin box.” 

The plan which Whitney and his associates now 
followed was to obtain control, in various ways, 
of all the surface railways in New York and place 
them under the leadership of the Metropolitan. 
Through their political influences they obtained 
franchises of priceless value, organized subsidiary 


140° THE AGE OF BIG BUSINESS ; 


street railway companies, and exchanged the sto 
of these subsidiary companies for that of the Met- 
ropolitan. A few illustrations will show the char 


acter of these transactions. They thus acquired, 


practically as a free gift, a franchise to build a cabl 
railroad on Lexington Avenue. At an extremely 
liberal estimate, this line cost perhaps $2,500,000 
to construct, yet the syndicate turned this over to” 
the Metropolitan for $10,000,000 of Metropolitan | 
securities. They similarly acquired a franchise for | 
a line on Columbus Avenue, spending perhap 
$500,000 in construction, and handing the com- 
pleted property over to the Metropolitan for $6,- 
000,000. In exchange for these two properties, — 


representing a real investment, it has been main- 
tained, of $3,000,000, the inside syndicates received 
securities which had a face value of $16,000,000 
and which, as will appear subsequently, had a 
market cash value of not far from $25,000,000. | 
They purchased an old horse-car line on Fulton — 
Street, a line whose assets consisted of one-third - 
of a mile of tracks, ten little box cars, thirt " 
horses, and an operating deficit of $40,000 a year. | 
At auction, its visible assets might have brought 4 
$15,000; yet the syndicate turned this over to the 7 
Metropolitan for $1,000,000. They spent $50,000 


~~ 


PUBLIC UTILITIES 141 


in constructing and equipping a horse railroad on 
Twenty-eighth and Twenty-ninth Streets and 
turned this over to the Metropolitan for $3,000,000. 
For two and a half miles of railroad on Thirty- 
fourth Street, which represented a cash expendi- 
ture of perhaps $100,000, they received $2,000,000 
of Metropolitan stock. But it is hardly necessary 
to catalogue more instances; the plan of operations 
must now be fairly evident. It was for the mem- 
bers of the syndicate, as individuals, to collect all 
the properties and new franchises that were avail- 
able and to transfer them to the Metropolitan at 
enormously inflated values. So far, all these deals 
were purely stock transactions — no cash had yet 
changed hands. When the amalgamation was com- 
plete, the insiders found themselves in possession 
of large amounts of Metropolitan stock. Their 
scheme for transforming this paper into more tan- 
gible property forms the concluding chapter of this 
Metropolitan story.* 

Nearly all the properties actually purchased and 
transferred in the manner described above, had 
little earning capacity, and therefore little value; 
they were decrepit horse-car lines in unprofitable 


*In 1897 the Traction Company dissolved, after distributing 
$6,000,000 as ‘‘a voluntary dividend” among its stockholders. 


142 THE AGE OF BIG BUSINESS ; 


territory. The really valuable roads were those 
that traversed the great north and south thorough- 
fares — Lenox, Third, Fourth, Sixth, Eighth, aan 
Ninth Avenues. Many old New York families and 
estates had held these properties for years and had 
collected large annual dividends from them. Nat- 
urally they had no desire to sell, yet their acquisi- 
tion was essential to the monopoly which the White 
ney-Ryan syndicate aspired to construct. They 
finally leased all these roads, under agreements. 


which guaranteed large annual rentals. In prac; 
tically all these cases the Metropolitan, in order to 
secure physical possession, agreed to pay rentals 
that far exceeded the earning capacity of the road, 
What is the explanation of such insane finance? 


We do not have the precise facts in the matter 
of the New York railways; but similar operations 
in Chicago, which have been officially made pub- 
lic, shed the utmost light upon the situation. 4 
order to get possession of a single road in Chicago, 
Widener and Elkins guaranteed a thirty-five per 
cent dividend; to get one Philadelphia line, they 
guaranteed 6514 per cent on capital paid in. This, 
of course, was not business; the motives actuating 
the syndicate were purely speculative. In Chicago, 
Widener and Elkins quietly made large purchases 


PUBLIC UTILITIES 143 


#f the stock in these roads before they leased them 
© the parent company. The exceedingly profit- 
ible lease naturally gave such stocks a high value, 
n case they preferred to sell; if they held them, 
hey reaped huge rewards from the leases which 
hey had themselves decreed. Perhaps their most 
emarkable exploit was the lease of the West Di- 
fision Railway Company of Chicago to the West 
Shicago Street Railroad. Widener and Elkins con- 
rolled the West Division Railway; their partner, 
Jharles T. Yerkes, controlled the latter corpora- 
ion. The negotiation of a lease, therefore, was a 
yurely informal matter; the partners were merely 
lealing with one another; yet Widener and Elkins 
eceived a fee of $5,000,000 as personal compensa- 
ion for negotiating this lease! 

But this whole leasing system, both in New York 
nd Chicago, entailed scandals perhaps even more 
eprehensible. All these leased properties, when 
aken over, were horse-car lines, and their trans- 
ormation into electrically propelled systems in- 
rolved reconstruction operations on an extensive 
cale. It seems perfectly clear that the chief mo- 
ive which inspired these extravagant leases was 
he determination of the individuals who made up 


he syndicate to obtain physical possession and 


144 THE AGE OF BIG BUSINESS 


to make huge profits on construction. The “‘con- 
struction accounts” of the Metropolitan in New 
York form the most mysterious and nce 
chapter in its history. The Metropolitan reports 
show that they spent anywhere from $500,000 te 
$600,000 a mile building underground trolley lines 
which, at their own extravagant estimate, should 
have cost only $150,000. In a few years untold 
millions, wasted in this way, disappeared from the 
Metropolitan treasury. In 1907 the Public Ser- 
vice Commission of New York began investigating 
these “construction accounts,” but it had not pro- 
ceeded far when the discovery was made that I 
the Metropolitan books containing the pie 
desired had been destroyed. All the ledgers, jo r- 
nals, checks, and vouchers containing the finan. 
cial history of the Metropolitan since its organi: 
zation in 1893 had been sold for $117 to a junk. 
man, who had agreed in writing to grind them inte 
pulp, so that they would be safe from “prying 
eyes.”’ We shall therefore never know precis ely 
how this money was spent. But here again he 
Chicago transactions help us to an understandin g 
In 1898 Charles T. Yerkes, with that cynical fra id 
ness which some people have regarded as a redee m 


ing trait in his character, opened his books for th 


K 


PUBLIC UTILITIES 145 


preceding twenty-five years to the Civic Federa- 
tion of Chicago. These books disclosed that Mr. 
Yerkes and his associates, Widener and Elkins, had 
made many millions in reconstructing the Chicago 
lines at prices which represented gross overcharges 
tothe stockholders. For this purpose Yerkes, Wide- 
ner, and Elkins organized the United States Con- 
struction Company and made contracts for instal- 
ing the new electric systems on the lines which 
they controlled by lease or stock ownership. It 
seems a not unnatural suspicion that the vanished 
Metropolitan books would have disclosed similar 
periormances in New York. 

The concluding chapter of this tragedy has its 
setting in theStock Exchange. These inside gentle- 
men, as already said, received no cash as their prof- 
its from these manipulations— only stock. But 
m the eyes of the public this stock represented an 
snormous value. Metropolitan securities, for ex- 
ample, represented the control and ownership of 
all the surface transit business in the city of New 
York. Naturally, it had a great investment value. 
When it began to pay regularly seven per cent divi- 
dJends, the public appetite for Metropolitan became 
msatiable. The eager purchasers did not know, 
what we know now, that the Metropolitan did not, 


ro 


146 THE AGE OF BIG BUSINESS 


earn these dividends and never could have earned 
them. The mere fact that it was paying, as rentals 
on its leased lines, annual sums far in excess of their 
earning capacity, necessarily prevented anything 
in the nature of profitable operation. The un- 
pleasant fact is that these dividends were paid with 
borrowed money merely to make the stock market. 
able. It is not unlikely that the padded construe 
tion accounts, already described, may have con- 
cealed large disbursements of money for unearned 
dividends. When the Metropolitan was listed i in 
1897, it immediately went beyond par. The excite- 
ment that followed forms one of the most meng 
able chapters in the history of Wall Street. The 
investing public, egged on by daring and skillful 
stock manipulators, simply went mad and purchased 
not only Metropolitan but street railway shares 
that were then even more speculative. It was in 
these bubble days that Brooklyn Rapid Transit 
soared to heights from which it subsequent y 
descended precipitately. Under this stimulus, 
Metropolitan stock ultimately sold at $269 a 
share. Whilethe whole investing public was scram- 
bling for Metropolitan, the members of the e 


ploiting syndicate found ample opportunity to och 
The real situation became apparent when Willi 


PUBLIC UTILITIES 147 


». Whitney died in 1904 leaving an estate valued at 
40,000,000. Not a single share of Metropolitan 
yas found among his assets! The final crash came 
n 1907, when the Metropolitan, a wrecked and 
jlundered shell, confessed insolvency and went in- 
© a receivership. Those who had purchased its 
tock found their holdings as worthless as the tradi- 
ional western gold mine. Thestory of the Chicago 
nd Philadelphia systems, as well as that of nu- 
nerous Other cities, had been essentially the same. 
‘he transit facilities of millions of Americans had 
aerely become the instruments of a group of specu- 
ators who had made huge personal fortunes and had 
sft, as a monument of their labors, street railway 
mes whose gross overcapitalization was apparent 
o all and whose physical dilapidation in many 
ases revealed the character of their management. 
It seems perhaps an exaggeration to say that the 


mterprises which have resulted in equipping our 
merican cities and suburbs with trolley lines and 
lectric lighting facilities have followed the plan 
f campaign sketched above. Perhaps not all 
lave repeated the worst excesses of the syndicate 
hat so remorselessly exploited New York, Chicago, 
nd Philadelphia. Yet in most cases these elabo- 
ate undertakings have been largely speculative in 


— 


148 THE AGE OF BIG BUSINESS 


character. Huge issues of fictitious stock, created 
purely for the benefit of inner rings, have been al- 
most the prevailing rule. Stock speculation and 
municipal corruption have constantly gone hand 
in hand everywhere with the development of the 
public utilities. The relation of franchise corpora- 
tions to municipalities is probably the thing which 
has chiefly opened the eyes of Americans to certain 
glaring defects in their democratic organization, 
The popular agitation which has resulted has led 
to great political reforms. The one satisfaction 


which we can derive from such a relation as that 
given above is that, after all, it is representative of 
a past era in our political and economic life. No 
new ‘‘ Metropolitan syndicate” can ever repeat the 
operations of its predecessors. Practically every 
State now has utility commissions which regulate 
the granting of franchises, the issue of securities, 
the details of construction and equipment and 
service. An awakened public conscience has ef- 
fectively ended the alliance between politics and 
franchise corporations and the type of syndicate 
described in the foregoing pages belongs as much 
to our American past as that rude frontier civiliza- 
tion with which, after all, it had many chan 
teristics in common. Mi 


a 


CHAPTER VI 
‘MAKING THE WORLD’S AGRICULTURAL MACHINERY 


Tue Civil War in America did more than free the 
negro slave: it freed the white man as well. Inthe 
Civil War agriculture, for the first time in history, 
ceased to be exclusively a manual art. Upto that 
time the typical agricultural laborer had been a 
bent figure, tending his fields and garnering his 
crops with his own hands. Before the war had 
ended the American farmer had assumed an erect 
position; the sickle and the scythe had given way 
to a strange red chariot, which, with practically no 
expenditure of human labor, easily did the work 
of a dozen men. Many as have been America’s 
contributions to civilization, hardly any have ex- 
erted greater influence in promoting human welfare 
than her gift of agricultural machinery. It seems 
astounding that, until McCormick invented his 
Teaper, in 1831, agricultural methods, in both the 


New and the Old World, differed little from those 
149 


150 THE AGE OF BIG BUSINESS 


that had prevailed in the days of the Babylonians, 
The New England farmer sowed his fields and 
reaped his crops with almost identically the same 
instruments as those which had been used by the 
Roman farmer in the time of the Gracchi. Only 
a comparatively few used the scythe; the great 
majority, with crooked backs and bended ol 
cut the grain with little hand sickles precisely like 
those which are now dug up in Etruscan and Beye 
tian tombs. 

Though McCormick had invented his reaper in 
1831, and though many rival machines had m | 
peared in the twenty years preceding the Civil War, 
only the farmers on the great western plains had 
used the new machinery to any considerable extent, 
The agricultural papers and agricultural fairs had 
not succeeded in popularizing these great labor- 
saving devices. Labor was so abundant and so 
cheap that the farmer had no need of them. But 
the Civil War took one man in three for the armies, 
and it was under this pressure that the farmers 
really discovered the value of machinery. Asm 
boy or girl could mount a McCormick reaper 
cut a dozen acres of grain ina day. This circum- 
stance made it possible to place millions of soldiers 
in the field and to feed the armies from farms on 


, 


ermameey 


i 


} 


AGRICULTURAL MACHINERY 151 


hich mature men did very little work. But the 
saper promoted the Northern cause in other ways. 
ts use extended so in the early years of the war 
hat the products of the farms increased on an enor- 
1ous scale, and the surplus, exported to Europe, 
irnished the liquid capital that made possible the 
nancing of the war. Europe gazed in astonish- 
lent at a new spectacle in history; that of a 
ation fighting the greatest war which had been 
nown up to that time, employing the greater part 
f her young and vigorous men in the armies, and 
et growing infinitely richer in the process. The 
ivil War produced many new implements of war- 
are, such as the machine gun and the revolving 
urret for battleships, but, so far as determining 
he result was concerned, perhaps the most im- 
yrtant was the reaper. 


| Extensive as the use of agricultural machinery 
ecame in the Civil War, that period only faintly 
reshadowed the development that has taken place 
ince. The American farm is today like a huge 
nctory; the use of the hands has almost entirely 
isappeared; there are only a few operations of 
usbandry that are not performed automatically. 
Civil War days the reaper merely cut the grain; 


bw machinery rakes it up and binds it into sheaves 


152 THE AGE OF BIG BUSINESS 


and threshes it. Similar mechanisms bind corn an¢ 
rice. Machinery is now used to plant potatoes 
grain, cotton, and other farm products are so 
automatically. The husking bees that formed o 
of our social diversions in Civil War days have 
disappeared, for particular machines now rip the 
husks off the ears. Horse hay-forks and horse hay- 
rakes have supplanted manual labor. The mere 
names of scores of modern instruments of farming, 
all unknown in Civil War days — hay carriers, hay y 
loaders, hay stackers, manure spreaders, horse co: n 
planters, corn drills, disk harrows, disk ploughs, 
steam ploughs, tractors, and the like — give so me 
suggestion of the extent to which America has 
made mechanical the most ancient of occupations. 


. | 
In thus transforming agriculture, we have de 


veloped not only our own Western plains, but 
we have created new countries. Argentina could 
hardly exist today except for American agricultural 
machinery. Ex-President Loubet declared, a fe y 
years ago, that France would starve to death ox. 


a 


freedom and opportunity, but merely as “the plae 


AGRICULTURAL MACHINERY 153 


33 


from which the reapers come.” The traveler sud- 
denly comes upon these familiar agents in every 
/European country, in South America, in Egypt, 
China, Algiers, Siberia, India, Burma, and Aus- 
tralia. For agricultural machinery remains today, 
/what it has always been, almost exclusively an 
American manufacture. It is practically the only 
native American product that our European com- 
petitors have not been able to imitate. Tariff 
| walls, bounty systems, and all the other artificial 
aids to manufacturing have not developed this 
industry in foreign lands, and today the United 
States produces four-fifths of all the agricultural 
machinery used in the world. The International 
Harvester Company has its salesmen in more than 
fifty countries, and has established large American 
factories in many nations of Europe. 

One day, a few years before his death, Prince 
Bismarck was driving on his estate, closely follow- 
ing a self-binder that had recently been put to 
work. The venerable statesman, bent and feeble, 
seemed to find a deep melancholy interest in the 
operation. 

“Show me the thing that ties the knot,”’ he said. 
It was taken to pieces and explained to him in 
detail. 


t 
154 THE AGE OF BIG BUSINESS , 

“‘Can these machines be made in Germany?” he 
asked. 


““No, your Excellency,” came the reply. “They 
can be made only in America.” 


The old man gavea sigh. “Those Yankees are 1 
ingenious fellows,” he said. “This is a wonderful _ 
machine.” 


In this story of American success, four names 
stand out preéminently. The men who made the 
greatest contributions were Cyrus H. McCormick, _ 
C. W. Marsh, Charles B. Withington, and John 
F. Appleby. The name that stands foremost, of © 
course, is that of McCormick, but each of the others - | 
made additions to his invention that have pro- 
duced the present finished machine. It seems like 
the stroke of an ironical fate which decreed that 
since it was the invention of a Northerner, Eli 
Whitney, that made inevitable the Civil War, so it 
was the invention of a Southerner, Cyrus McCor- 
mick, that made inevitable the ending of that war 
in favor of the North. 

McCormick was born in Rockbridge Conall : 
Virginia, on a farm about eighteen miles from ~ 
Staunton. He was a child of that pioneering 
Scotch-Irish race which contributed so greatly to 
the settlement of this region and which afterward — 


AGRICULTURAL MACHINERY 155 


made such inestimable additions to American citi- 
zenship. The country in which he grew up was 
rough and, so far as the conventionalities go, un- 
civilized; the family homestead was little more 
than a log cabin; and existence meant a continual 
struggle with a not particularly fruitful soil. The 
most remarkable figure in the McCormick home 
circle, and the one whose every-day life exerted the 
greatest influence on the boy, was his father. The 
older McCormick had one obsessing idea that made 
him the favorite butt of the local humorists. He 
believed that the labor spent in reaping grain was 
a useless expenditure of human effort and that 
machinery might be made to do the work. Other 
men, in this country and in Europe, had nourished 
similar notions. Several Englishmen had invented 
reaping machines, all of which had had only a single 
defect — they would notreap. An ingenious Eng- 
lish actor had developed a contrivance which would 
cut imitation wheat on the stage, but no one had 
developed a machine that would work satisfac- 
torily in real life. Robert McCormick spent the 
larger part of his days and nights tinkering at a 
practical machine. He finally produced a horrific 
contrivance, made up of whirling sickles, knives, 
and revolving rods, pushed from behind by two 


156 THE AGE OF BIG BUSINESS 
5 
d, 


horses; when he tried this upon a grain-fiel 

however, it made a humiliating failure. 
Evidently Robert McCormick had ambitio: 

far Pon his powers; yet, Poet his absurg 1 


gatherings that took place about the family log 
fire. Robert McCormick had several sons, and one 


manifested a particular interest in his repeatec 
failures. From the time he was seven years ok 
Cyrus Hall McCormick became his father’s closes 


companion. Others might ridicule and revile, but 
this chubby, bright-eyed, intelligent little boy wa: 
always the keenest listener, the one comfort whi 
the father had against his jeering neighbors. | 
also became his father’s constant associate in his 
rough workshop. Soon, however, the older man 
noticed a change in their relations. The boy was 
becoming the teacher, and the father was taught. 


ter had become merely a proud observer. Youn; 
McCormick threw into the discard all his fathers 
ideas and struck out on entirely new lines. By the 
time he had reached his twenty-second birthday hi 


AGRICULTURAL MACHINERY 157 


had constructed a machine which, in all its essen- 
| tial details, is the one which we have today. He 
had introduced seven principles, all of which are 
an indispensable part of every reaper constructed 
| mow. One afternoon he drove his unlovely con- 
| traption upon his father’s farm, with no witnesses 
| except his own family. This group now witnessed 
| the first successful attempt ever made to reap with 
| machinery. A few days later young McCormick 
gave a public exhibition at Steele’s Tavern, cutting 
six acres of oats in an afternoon. The popular 
ridicule soon changed into acclaim; the new inven- 
tion was exhibited in a public square and Cyrus 
McCormick became a local celebrity. Perhaps the 
words that pleased him most, however, were those 
spoken by his father. “I am proud,”’ said the old 
man, “to have a son who can do what I failed to 
do.” 

This McCormick reaper dates from 1831; but it 
represented merely the beginnings of the modern 
machine. It performed only a single function; it 
simply cut the crop. ‘When its sliding blade had 
performed this task, the grain fell back upon a plat- 
form, and a farm hand, walking alongside, raked 
this off upon the ground. A number of human har- 
vesters followed, picked up the bundles, and tied a 


’ 


158 THE AGE OF BIG BUSINESS 


few strips of grain around them, making the sheaf. 
The work was exceedingly wearying and particu- | 
larly hard upon the women who were frequently 
impressed into service as farm-hands. About 1858 : 
two farmers named Marsh, who lived near De 
Kalb, Illinois, solved this prohlem. They at-_ 
tached to their McCormick reaper a moving plat- | 
form upon which the cut grain was deposited. A 
footboard. was fixed to the machine upon which — 
two men stood. As the grain came upon this_ 
moving platform these men seized it, bound it into 
sheaves, and threw it upon the field. Simple as this | 
procedure seemed it really worked a revolution in — 
agriculture; for the first time since the pronounce- _ 
ment of the primal curse, the farmer abandoned _ 
his hunchback attitude and did his work standing q 
erect. Yet this device also had its disqualifications, 
the chief one being that it converted the human | 
sheaf-binder into a sweat-shop worker. It was 
necessary to bind the grain as rapidly as the plat- 
form brought it up; the worker was therefore kept — 
in constant motion; and the consequences were fre- 
quently distressing and nerve racking. Yet this — 
*‘Marsh Harvester”’ remained the great favorite — 
with farmers from about 1860 to 1874. } 
All this time, however, there was a growing : 


? 
™ 


j 


AGRICULTURAL MACHINERY 159 


feeling that even the Marsh harvester did not re- 

present the final solution of the problem; the air 
was full of talk and prophecies about self-binders, 
something that would take the loose wheat from 
the platform and transform it into sheaves. Hun- 
dreds of attempts failed until, in 1874, Charles B. 
Withington of Janesville, Wisconsin, brought to 
McCormick a mechanism composed of two steel 
arms which seized the grain, twisted a wire around 
it, cut the wire, and tossed the completed sheaf 
to the earth. In actual practice this contrivance 
worked with the utmost precision. Finally Amer- 
ican farmers had a machine that cut the grain, 
raked it up, and bound it into sheaves ready for 
the mill. Human labor had apparently lost its use- 
fulness; a solitary man or woman, perched upon a 
seat and driving a pair of horses, now performed 
all these operations of husbandry. 

By this time, scores of manufacturers had en- 
tered the field in opposition to McCormick, but his 
acquisition of Withington’s invention had appar- 
ently made his position secure. Indeed, for the 
next ten years he had everything his own way. 
Then suddenly an ex-keeper of a dry-goods store in 
Maine crossed his path. This was William Deer- 
ing, a character quite as energetic, forceful, and 


160 THE AGE OF BIG BUSINESS 


pugnacious as was McCormick himself. Though — 
McCormick had made and sold thousands of his 


self-binders, farmers were already showing signs 


of discontent. The wire proved a continual an- 


noyance. It mingled with the straw and killed | 
the cattle — at least so the farmers complained; it 


cut their hands and even found its way, with dis- 


astrous results, into the flour mills. Deering now — 


appeared as the owner of a startling invention by 
John F. Appleby. This did all that the Withing- 
ton machine did and did it better and quicker; 


and it had the great advantage that it bound with — 
twine instead of wire. The new machine imme- 


diately swept aside all competitors; McCormick, _ 
to save his reaper from disaster, presently per-_ 


fected a twine binder of hisown. The appearance 
of Appleby’s improvement in 1884 completes the - 
cycle of the McCormick reaper on its mechanical 
side The harvesting machine of fifty nations to- 
day is the one to which Appleby put the final 
touches in 1884. Since then nothing of any great 
importance has been added. : 


This outline of invention, however, comprises 


only part of the story. The development of the — 


reaper business presents a narrative quite as ad- 
venturous as that of the reaper itself. Cyrus 


AGRICULTURAL MACHINERY 161 


“McCormick was not only a great inventor; he was 
also agreat businessman. So great was his ability 
‘in this direction, indeed, that there has been a tend- 
-ency to discredit his achievements as a creative gen- 
ius and to attribute his success to his talents as an 
organizer and driver of industry. “‘I may makea 
million dollars from this reaper, ’’ said McCormick, 
in the full tide of enthusiasm over his invention; 
and these words indicate an indispensable part of 
his program. He had no miserly instinct but he 
had one overpowering ambition. It was McCor- 
mick’s conviction, almost religious in its fervor, 
that the harvester business of the world belonged 
ohim. As already indicated, plenty of other hardy 
spirits, many of them almost as commanding per- 
sonalities as himself, disputed the empire. Not 
far from 12,000 patents on harvesting machines 
were granted in this country in the fifty years fol- 
lowing McCormick’s invention, and more than two 
hundred companies were formed to compete for the 
market. McCormick always regarded these com- 
petitors as highwaymen who had invaded a field 
which had been almost divinely set apart for him- 
self. A man of covenanting antecedents, heroic 
in his physical proportions, with a massive, Jove- 
like head and beard, tirelessly devoted to his work, 


ai 


a 
162 THE AGE OF BIG BUSINESS } 
watching every detail with a microscopic eye, mar- 
shaling a huge force of workers who were as pos: 
sessed by this one overruling idea as was Me. 
Cormick himself, he certainly presented an almost 


unassailable battlefront to his antagonists. | 

The competition that raged between McCormick 
and the makers of rival machines was probably 
the fiercest that has prevailed in any American. 
industry. For marketing his machine McCor- 
mick developed a system almost as ingenious as 
the machine itself. The popularization of so un- 
gainly and expensive a contrivance as the harves- 
ter proved a slow and difficult task. McCormick at 
first attempted to build his product on his Virginia. 
farm and for many years it was known as the Vir- 


ginia Reaper. Nearly ten years passed, however, 
before he sold his first machine. The farmer first 
refused to take it seriously. “It’s a great inven- 
tion,”’ he would say, “‘but I’m running a farm, not 
a circus.”” About 1847 McCormick decided that 
the Western prairies offered the finest field for its 
activities, and established his factory at Chicago, 
then an ugly little town on the borders of a swamp. 
This selection proved to be a stroke of genius, for 
it placed the harvesting factory right at the door 
of its largest market. 


— 


—— 


AGRICULTURAL MACHINERY 163 


_ The price of the harvester, however, seemed 
an insurmountable obstacle to its extensive use. 
The early settlers of the Western plains had little 
more than their brawny hands as capital, and the 
homestead law furnished them their land practi- 
cally free. In the eyes of a large-seeing pioneer 
like McCormick this was capital enough. He de- 
termined that his reaper should develop this ex- 
tensive domain, and that the crops themselves 
should pay the cost. Selling expensive articles on 
the installment plan now seems a commonplace 
of business, but in those days it was practically 
unknown. McCormick was the first to see its 
possibilities. He established an agent, usually 
the general storekeeper, in every agricultural cen- 
ter. Any farmer who had a modicum of cash 
and who bore a reputation for thrift and honesty 
could purchase a reaper. In payment he gave a 
series of notes, so timed that they fell due at the 
end of harvesting seasons. Thus, as the money 
came in from successive harvests, the pioneer paid 
off the notes, taking two, three, or four years in the 
process. In the sixties and seventies immigrants 
from the Eastern States and from Europe poured 
into the Mississippi Valley by the hundreds of 
thousands. Almost the first person who greeted 


164 THE AGE OF BIG BUSINESS A 


the astonished Dane, German, or Swede was an 
agent of the harvester company, offering to let him 
have one of these strange machines on these terms. 
Thus the harvester, under McCormick’s compre- 
hensive selling plans, did as much as the homestead 
act in opening up this great farming region. j { 

McCormick covered the whole agricultural 
United States with these agents. In this his nu- 
merous competitors followed suit, and the live- 
liest times ensued. From that day to this the 
agents of harvesting implements have lent much 


animation and color to rural life in this country. 
Half a dozen men were usually tugging away at 
one farmer at the same time. The mere fact that 
the farmer had closed a contract did not end his 
troubles, for “‘busting up competitors’ sales”’ was 
part of the agent’s business. The situation fre- 
quently reached a point where there was only one 
way to settle rival claims and that was by a field 
contest. At a stated time two or three or four 
rival harvesters would suddenly appear on the 
farmer’s soil, each prepared to show, by actual 
test, its superiority over the enemy. Farmers and 
idlers for miles around would gather to witness 
the Homeric struggle. Ata given signal the small 
army of machines would spring savagely at a field 


AGRICULTURAL MACHINERY 165 


of wheat. Theone that could cut the allotted area 
in the shortest time was regarded as the winner. 
The harvester would rush on all kinds of fields, 
flat and hilly, dry and wet, and would cut all kinds 
of crops, and even stubble. All manner of tests 
were devised to prove one machine stronger than 
its rival; a favorite idea was to chain two back to 
back, and have them pulled apart by frantic career- 
ing horses; the one that suffered the fewest break- 
downs would be generally acclaimed from town to 
town. Sometimes these field tests were the most 
exciting and spectacular events at country fairs. 
Thus the harvesting machine “pushed the fron- 
,tier westward at the rate of thirty miles a year,” 
according to William H. Seward. It made Amer- 
ican and Canadian agriculture the most efficient 
in the world. The German brags that his agricul- 
ture is superior to American, quoting as proof the 
more bushels of wheat or potatoes he grows to an 
acre. But the comparison is fallacious. The real 
test of efficiency is, not the crops that are grown 
per acre, but the crops that are grown per man em- 
ployed. German efficiency gets its results by im- 
pressing women as cultivators — depressing bent 
figures that are in themselves a sufficient criticism 
upon any civilization. America gets its results 


166 THE AGE OF BIG BUSINESS 


by using a minimum of human labor and letting ma- 
chinery do the work. Thus America’s methods are 
superior not only from the standpoint of economies 


but of social progress. All nations, including Ger- 
many, use our machinery, but none to the extent 
that prevails on the North American Continent. _ 


Perhaps McCormick’s greatest achievement is_ 
that his machine has banished famine wherever 


it is extensively used, at least in peace times. Be- | 
fore the reaper appeared existence, even in the 
United States, was primarily a primitive struggle 
for bread. The greatest service of the harvester 
has been that it has freed the world—unless 
it is a world distracted by disintegrating war — | 
from a constant anxiety concerning its food supply. 
The hundreds of thousands of binders, active in 

the fields of every country, have made it certain 
that humankind shall not want for its daily bread. 
When McCormick exhibited his harvester at the 
London Exposition of 1851, the London Times ridi- 


ee 


culed it as “a cross between an Astley chariot, a 
wheel barrow, and a flying machine.” Yet this’ 
same grotesque object, widely used in Canada, 
Argentina, Australia, South Africa, and India, 
becomes an engine that really holds the British 


Empire together. 


AGRICULTURAL MACHINERY 167 


For the forty years succeeding the Civil War the 
manufacture of harvesting machinery was a busi- 
ness in which many engaged, but in which few 
survived. The wildest competition ruthlessly de- 
stroyed all but half a dozen powerful firms. Cyrus 
McCormick died in 1884, but his sons proved 
worthy successors; the McCormick factory still 
headed the list, manufacturing, in 1900, one-third 
of all the self-binders used in the world. The Wil- 
liam Deering Company came next and then D. M. 
Osborne, J. J. Glessner, and W. H. Jones, estab- 
lished factories that made existence exceedingly 
uncomfortable for the pioneers. Whatever one 
_may think of the motives which caused so many 
combinations in the early years of the twentieth 
century, there is no question that irresistible eco- 
nomic forces compelled these great harvester com- 
panies to get together. Quick profits in the shape 
of watered stock had nothing to do with the for- 
mation of the International Harvester Company. 
All the men who controlled these enterprises were 
individualists, with a natural loathing for trusts, 
combinations, and pools. They wished for nothing 
better than to continue fighting the Spartan battle 
that had made existence such an exciting pastime 
for more than half a century. But the simple fact 


168 THE AGE OF BIG BUSINESS 


was that these several concerns were destroying 


one another; it was a question of joming hands, 


ending the competition that was eating so deeply - 


into their financial resources, or reducing the whole 


business to chaos. When Mr. George W. Perkins, — 
of J. P. Morgan and Company, first attempted to _ 


combine these great companies, the antagonisms 


which had been accumulated in many years of war- — 
fare constantly threatened to defeat his end. He 


early discovered that the only way to bring these 
men together was to keep them apart. The usual 


way of creating such combinations is to collect the © | 
representative leaders, place them around a table, — 


and persuade them to talk the thing over. Such 


an amicable situation, however, was impossible 


in the present instance. Even when the four big 
men— McCormick, Deering, Glessner, and Jones— 
were finally brought for the final treaty of peace 
to J. P. Morgan’s office, Mr. Perkins had to station 
them in four separate rooms and flit from one 
to another arranging terms. Had these four men 


ee 


been brought face to face, the Harvester Company — 


would probably never have been formed. 

Having once signed their names, however, these 
once antagonistic interests had little difficulty ir 
forming a strong combination. The company thus 


AGRICULTURAL MACHINERY 169 


brought together manufactured 85 per cent of 

all the farm machinery used in this country. It 
owned its own coal-fields and iron mines and its 
own forests, and it produces most of the implements 
used by 10,000,000 farmers. In 1847 Cyrus McCor- 
mick made 100 reapers and sold them for $10,000; 
by 1902 the annual production of the corporation 
amounted to hundreds of thousands of harvesters 
—besides an almost endless assortment of other 
agricultural tools, ploughs, drills, rakes, gasoline 
engines, tractors, threshers, cream separators, and 
the like — and the sales had grown to about $75,- 
000,000. This is merely the financial measure of 
progress; the genuine achievements of McCor- 
mick’s invention are millions of acres of pro- 
ductive land and a farming population which is 
without parallel elsewhere for its prosperity, in- 
telligence, manfulness, and general contentment. 


CHAPTER VII 


THE DEMOCRATIZATION OF THE AUTOMOBILE 


In many manufacturing lines, American genius for 
organization and large scale production has devel-_ 
oped mammoth industries. In nearly all the tend- 
ency to combination and concentration has exer-_ 
cised a predominating influence. In the early years | 
of the twentieth century the public realized, for the — 
first time, that one corporation, the American Sugar 
Refining Company, controlled ninety-eight per cent — 
of the business of refining sugar. Six large inter- 
ests — Armour, Swift, Morris, the National Pack-— | 
ing Company, Cudahy, and Schwarzschild and Sulz- 
berger — had so concentrated the packing business 
that, by 1905, they slaughtered practically all the 
cattle shipped to Western centers and furnished 
most of the beef consumed in the large cities 
east of Pittsburgh. The “Tobacco Trust” had 
largely monopolized both the wholesale and retail 


trade in this article of luxury and had also made 
170 


THE AUTOMOBILE 171 


extensive inroads into the English market. The 
textile industry had not only transformed great 
centers of New England into an American Lanca- 
shire, but the Southern States, recovering from the 
demoralization of the Civil War, had begun to spin 
their own cotton and to send the finished product 
to all parts of the world. American shoe manu- 
facturers had developed their art to a point where 
«<A merican shoes” had acquired a distinctive stand- 
ing in practically every European country. 

It is hardly necessary to describe in detail each 
of these industries. In their broad outlines they 
merely repeat the story of steel, of oil, of agricul- 
tural machinery; they are the product of the same 
methods, the same initiative. There is one branch 
of American manufacture, however, that merits 
more detailed attention. If we scan the manufac- 
turing statistics of 1917, one amazing fact stares us 
in the face. There are only three American indus- 
tries whose product has attained the billion mark; 
one of these is steel, the other food products, while 
the third is an industry that was practically un- 
known in the United States fifteen years ago. 
Superlatives come naturally to mind in discussing 
American progress, but hardly any extravagant 
phrases could do justice to the development of 


172 THE AGE OF BIG BUSINESS : 


American automobiles. In 1899 the United States 
produced 3700 motor vehicles; in 1916 we made 
1,500,000. The man who now makes a personal | 
profit of not far from $50,000,000 a year in this i ind 
dustry was a puttering mechanic when the tone 
tieth century came in. If we capitalized Henry — 


Ford’s income, he is probably a richer man than | 
Rockefeller; yet, as recently as 1905 his possessions ; 
consisted of a little shed of a factory which cull 
ployed a dozen workmen. Dazzling as is this per- 
sonal success, its really important aspects are the | 
things for which it stands. The American automo-— | 
bile has had its wild-cat days; for the larger part, _ 
however, its leaders have paid little attention to : 
Wall Street, but have limited their activities ex-_ 
clusively to manufacturing. Moreover, the auto- — 
mobile illustrates more completely than any other _ 
industry the technical qualities that so largely ex- 
plain our industrial progress. Above all, Amer- 
ican manufacturing has developed three character- 
istics. These are quantity production, standardiza- 
tion, and the use of labor-saving machinery. Itis— 
because Ford and other manufacturers adapted 
these principles to making the automobile that the ~ 
American motor industry has reached such gigantic 4 
proportions. 3 
{ 
‘¢ 


THE AUTOMOBILE 173 


A few years ago an English manufacturer, seek- 
| ing the explanation of America’s ability to produce 
- an excellent car so cheaply, made an interesting 


experiment. He obtained three American auto- 
mobiles, all of the same “‘standardized’”’ make, and 
gave them a long and racking tour over English 
highways. Workmen then took apart the three 
cars and threw the disjointed remains into a pro- 
miscuous heap. Every bolt, bar, gas tank, motor, 
wheel, and tire was taken from its accustomed 
place and piled up, a hideous mass of rubbish. 
Workmen then painstakingly put together three 
cars from these disordered elements. Three chauf- 
feurs jumped on these cars, and they immediately 
started down the road and made a long journey 
just as acceptably as before. The Englishman 
had learned the secret of American success with 
automobiles. The one word “standardization ” 
explained the mystery. 

Yet when, a few years before, the English re- 
ferred to the American automobile as a “glorified 
perambulator,”’ the characterization was not un- 
just. This new method of transportation was slow 
in finding favor on our side of the Atlantic. Amer- 
ica was sentimentally and practically devoted to 
the horse as the motive power for vehicles; and the 


174 THE AGE OF BIG BUSINESS 


fact that we had so few good roads also worked 
against the introduction of the automobile. Yet 
here, as in Europe, the mechanically propelled — 
wagon made its appearance in early times. This | 
vehicle, like the bicycle, is not essentially a modern © 
invention; the reason any one can manufacture it is _ 
that practically all the basic ideas antedate 1840. 
Indeed, the automobile is really older than the 
railroad. In the twenties and thirties, steam stage _ 
coaches made regular trips between certain cities 
in England and occasionally a much resound- | 
ing power-driven carriage would come careering _ 
through New York and Philadelphia, scaring all 
the horses and precipitating the intervention of the 
authorities. The hardy spirits who devised these 
engines, all of whose names are recorded in the 
encyclopedias, deservedly rank as the “fathers” 
of the automobile. The responsibility as the actual — 
“inventor” can probably be no more definitely — 
placed. However, had it not been for two develop- 
ments, neither of them immediately related to the 
motor car, we should never have had this efficient 
method of transportation. The real “fathers” of 
the automobile are Gottlieb Daimler, the German 
who made the first successful gasoline engine, and — 
Charles Goodyear, the American who discovered 


ae 


THE AUTOMOBILE 175 


the secret of vulcanized rubber. Without this en- 
gine to form the motive power and the pneu- 
matic tire to give it four air cushions to run on, the 
automobile would never have progressed beyond 
the steam carriage stage. It is true that Charles 
Baldwin Selden, of Rochester, has been pictured as 
the “‘inventor of the modern automobile” because, 
as long ago as 1879, he applied for a patent on the 
idea of using a gasoline engine as motive power, 
securing this basic patent in 1895, but this, it must 
be admitted, forms a flimsy basis for such a preten- 
tious claim. 

The French apparently led all nations in the 
manufacture of motor vehicles, and in the early 
nineties their products began to make occasional 
appearances on American roads. The type of 
American who owned this imported machine was 
the same that owned steam yachts and a box at the 
opera. Hardly any new development has aroused 
greater hostility. It not only frightened horses, 
and so disturbed the popular traffic of the time, 
but its speed, its glamour, its arrogance, and the 
haughty behavior of its proprietor, had apparently 
transformed it into a new badge of social cleavage. 
It thus immediately took its place as a new gew- 
gaw of the rich; that it had any other purpose to 


176 THE AGE OF BIG BUSINESS ; 


serve had occurred to few people. Yet the French 
and English machines created an entirely differen 

reaction in the mind of an imaginative mechanie 
in Detroit. Probably American annals contain 


no finer story than that of this simple Americ 


workman. Yet from the beginning it seemed i 
evitable that Henry Ford should play this ap- 
pointed part in the world. Born in Michigan 
1863, the son of an English farmer who had e 
grated to Michigan and a Dutch mother, Ford h 
always demonstrated an interest in things far re 


' 


moved from his farm. Only mechanical devie 
interested him. He liked getting in the crops, 
because McCormick harvesters did most of the 
work; it was only the machinery of the dairy that 
held him enthralled. He developed destructive | 
tendencies as a boy; he had to take everything t > 
pieces. He horrified a rich playmate by resolving 
his new watch into its component parts — and 
promptly quieted him by putting it together again, 
‘Every clock in the house shuddered when it saw 


small working forge in his school-yard, and built a 
small steam engine that could make ten miles 2 
hour. He spent his winter evenings reading me- 
chanical and scientific journals; he eared little for 


; THE AUTOMOBILE 177 
general literature, but machinery in any form was 
almost a pathological obsession. Some boys run 
away from the farm to join the circus or to go to 
sea; Henry Ford at the age of sixteen ran away to 
get a job in a machine shop. Here one anomaly 
immediately impressed him. No two machines 
were made exactly alike; each was regarded as a 
separate job. With his savings from his weekly 
wage of $2.50, young Ford purchased a three 
dollar watch, and immediately dissected it. If 
several thousand of these watches could be made, 
each one exactly alike, they would cost only thirty- 
seven centsapiece. “Then,” said Ford to himself, 
“everybody could have one.”” He had fairly elabo- 
rated his plans to start a factory on this basis when 
his father’s illness called him back to the farm. 
This was about 1880; Ford’s next conspicuous 
appearance in Detroit was about 1892. This 
appearance was not only conspicuous; it was ex- 
ceedingly noisy. Detroit now knew him as the 
pilot of a queer affair that whirled and lurched 
through her thoroughfares, making as much dis- 
turbance as a freight train. In reading his techni- 
cal journals Ford had met many descriptions of 
horseless carriages; the consequence was that he 
had again broken away from the farm, taken a job 


I2 


178 THE AGE OF BIG BUSINESS 


at $45 a month in a Detroit machine shop, and 
devoted his evenings to the production of a gasoline 
engine. His young wife was exceedingly concerned 
about his health; the neighbors’ snap judgment was 
that he was insane. Only two other Americans, 
Charles B. Duryea and Ellwood Haynes, were at- 
tempting to construct an automobile at that time, 
Long before Ford was ready with his machine, 
others had begun to appear. Duryea turned out 
his first one in 1892; and foreign makes began to” 
appear in considerable numbers. But the Detroit 
mechanic had a more comprehensive inspiration, 
He was not working to make one of the finely 
upholstered and beautifully painted vehicles that 
came from overseas. ‘“‘Anything that isn’t good 
for everybody is no good at all,”’ he said. Precisely 
as it was Vail’s ambition to make every American 
a user of the telephone and McCormick’s to make | 
every farmer a user of his harvester, so it was 
Ford’s determination that every family should 

have an automobile. He was apparently the only 

man in those times who saw that this new ma- 

chine was not primarily a luxury but a convenience, 

Yet all manufacturers, here and in Europe, laughed 
at his idea. Why not give every poor man a 
Fifth Avenue house? Frenchmen and Englishmen 


THE AUTOMOBILE 179 


scouted the idea that any one could make a cheap 
automobile. Its machinery was particularly re- 
fined and called for the highest grade of steel; 
the clever Americans might use their labor-saving 
devices on many products, but only skillful hand 
work could turn out a motor car. European manu- 
facturers regarded each car as a separate prob- 
lem; they individualized its manufacture almost as 
scrupulously as a painter paints his portrait or a 
poet writes his poem. The result was that only a 
man with several thousand dollars could purchase 
one. But Henry Ford—and afterward other Amer- 
ican makers — had quite a different conception. 
Henry Ford’s earliest banker was the proprietor 
of a quick-lunch wagon at which the inventor used 
to eat his midnight meal after his hard evening’s 
work in the shed. ‘Coffee Jim,” to whom Ford 
confided his hopes and aspirations on these occa- 
sions, was the only man with available cash who 
had any faith in his ideas. Capital in more sub- 
stantial form, however, came in about 1902. With 
money advanced by “Coffee Jim,” Ford had built 
a machine which he entered in the Grosse Point 
races that year. It was a hideous-looking affair, 
but it ran like the wind and outdistanced all com- 
petitors. From that day Ford’s career has been 


180 THE AGE OF BIG BUSINESS : 
an uninterrupted triumph. But he rejected the | 


earliest offers of capital because the millionaires | 
would not agree to his terms. They were look- 
ing for high prices and quick profits, while Ford’s 
plans were for low prices, large sales, and use 
of profits to extend the business and reduce the 
cost of his machine. Henry Ford’s greatness as a_ 
manufacturer consists in the tenacity with which - 
he has clung to this conception. Contrary to gen-— 
eral belief in the automobile industry he main- 4 
tained that a high sale price was not necessary for 
large profits; indeed he declared that the lower the 
price, the larger the net earnings would be. Nor q 


did he believe that low wages meant prosperity. _ 


nal cost might be, was the most economical. The 
secret of success was the rapid production of ¢ 
serviceable article in large quantities. When Ford 
first talked of turning out 10,000 automobiles 7 | 
year, his associates asked him where he was going - 
to sell them. Ford’s answer was that that was no : 
problem at all; the machines would sell themselves : 
He called attention to the fact that there were 
millions of people in this country whose incomes 
exceeded $1800 a year; all in that class would be- 
come prospective purchasers of a low-priced auto~ 


THE AUTOMOBILE 181 


mobile. There were 6,000,000 farmers; what more 
receptive market could one ask? His only problem 
was the technical one — how to produce his ma- 
chine in sufficient quantities. 

The bicycle business in this country had passed 
through a similar experience. When first placed 
on the market bicycles were expensive; it took 
$100 or $150 to buy one. Ina few years, however, 
an excellent machine was selling for $25 or $30. 
What explained this drop in price? The answer is 
that the manufacturers learned to standardize their 
product. Bicycle factories became not so much 
places where the articles were manufactured as 
assembling rooms for putting them together. The 
several parts were made in different places, each 
establishment specializing in a particular part; they 
were then shipped to centers where they were trans- 
formed into completed machines. The result was 
that the United States, despite the high wages 
paid here, led the world in bicycle making and 
flooded all countries with this utilitarian article. 
Our great locomotive factories had developed on 
similar lines. Europeans had always marveled 
that Americans could build these costly articles 
so cheaply that they could undersell European 
makers. When they obtained a glimpse of an 


182 THE AGE OF BIG BUSINESS 


American locomotive factory, the reason became 


plain. In Europe each locomotive was a separate 


problem; no two, even in the same shop, were | 
exactly alike. But here locomotives are built | 
in parts, all duplicates of one another; the parts” | 
are then sent by machinery to assembling rooms 
and rapidly put together. American harvesting» 
machines are built in the same way; whenever a 
farmer loses a part, he can go to the country store | 
and buy its duplicate, for the parts of the same 
machine do not vary to the thousandth of an inch. — 
The same principle applies to hundreds of other 
articles. ia 
Thus Henry Ford did not invent standardization; — 
he merely applied this great American idea to a 
product to which, because of the delicate labor 
required, it seemed at first unadapted. He soon 
found that it was cheaper to ship the parts of ten 
cars to a central point than to ship ten completed — 
cars. There would therefore be large savings in” 
making his parts in particular factories and ship- 
ping them to assembling establishments. In this” 
way the completed cars would always be near their — 
markets. Large production would mean that he 
could purchase his raw materials at very low prices; 
high wages meant that he could get the efficient ~ 


THE AUTOMOBILE 183 


labor which was demanded by his rapid fire method 
ofcampaign. It was necessary to plan the making 
of every part to the minutest detail, to have each 
part machined to its exact size, and to have every 
screw, bolt, and bar precisely interchangeable. 
About the year 1907 the Ford factory was system- 
atized on this basis. ° In that twelvemonth it 
produced 10,000 machines, each one the absolute 
counterpart of the other 9999. American manu- 
facturers until then had been content with a few 
hundred a year! From that date the Ford pro- 
duction has rapidly increased; until, in 1916, there 
were nearly 4,000,000 automobiles in the United 
States — more than in all the rest of the world put 
together — of which one-sixth were the output of 


the Ford factories. Many other American manu- 
turers followed the Ford plan, with the result 
t American automobiles are duplicating the 
ry of American bicycles; because of their cheap- 
ess and serviceability, they are rapidly domina- 
ing the markets of the world. In the Great War 
merican machines have surpassed all in the work 
Mone under particularly exacting circumstances. 

A glimpse of a Ford assembling room — and we 
see the same process in other American fac- 
ries — makes clear the reasons for this success. 


184 THE AGE OF BIG BUSINESS 
In these rooms no fitting is done; the fragments of 


automobiles come in automatically and are simply 
bolted together. First of all the units are assem- 
bled in their several departments. The rear axles, 
the front axles, the frames, the radiators, and th 4 
motors are all put together with the same precision 
and exactness that marks the operation of the com= 
pleted car. Thus the wheels come from one part 
of the factory and are rolled on an inclined plane | 
to a particular spot. The tires are propelled by 
some mysterious force to the same spot; as the twa 
elements coincide, workmen quickly put them to- 
gether. In a long room the bodies are slowly ad. 


a foot per minute. At the side stand groups of 
men, each prepared to do his bit, their materials, 
being delivered at convenient points by chut es. 
As the tops pass by these men quickly bolt them 
into place, and the completed body is sent to a 
place where it awaits the chassis. This important 
section, comprising all the machinery, starts at one 
end of a moving platform as a front and rear axl e 
bolted together with the frame. As this slowly, 
advances, it passes under a bridge containing a 
gasoline tank, which is quickly adjusted. Fa | 
ther on the motor is swung over by a small hoist 


THE AUTOMOBILE 185 


and lowered into position on the frame. Presently 
the dash slides down and is placed in position 
behind the motor. As the rapidly accumulating 
mechanism passes on, different workmen adjust the 
mufflers, exhaust pipes, the radiator, and the wheels 
which, as already indicated, arrive on the scene 
completely tired. Then a workman seats himself 
on the gasoline tank, which contains a small quan- 
tity of its indispensable fuel, starts the engine, and 
the thing moves out the door under its own power. 
It stops for a moment outside; the completed body 
drops down from the second floor, and a few bolts 
quickly put it securely in place. The workman 
_ drives the now finished Ford to a loading platform, 
it is stored away in a box ear, and is started on its 
way to market. At the present time about 2000 
cars are daily turned out in this fashion. The 
nation demands them at a more rapid rate than 
they can be made. 

Herein we have what is probably America’s 
greatest manufacturing exploit. And this demo- 
eratization of the automobile comprises more than 
the acme of efficiency in the manufacturing art. 
The career of Henry Ford has a symbolic signifi- 
cance as well. It may be taken as signalizing the 
new ideals that have gained the upper hand in 


186 THE AGE OF BIG BUSINESS 


American industry. We began this review of | 
American business with Cornelius Vanderbilt as_ 
the typical figure. It is a happy augury that it 
closes with Henry Ford in the foreground. Vander-_ 
bilt, valuable as were many of his achievements, — 
represented that spirit of egotism that was ram- 
pant for the larger part of the fifty years following 
the war. He was always seeking his own advan- 
tage, and he never regarded the public interest as 
anything worth a moment’s consideration. With 
Ford, however, the spirit of service has been the 
predominating motive. His earnings have been 
immeasurably greater than Vanderbilt’s; his in- 
come for two years amounts to nearly Vanderbilt’s 
total fortune at his death; but the piling up of 
riches has been by no means his exclusive purpose. 
He has recognized that his workmen are his part- 
ners and has liberally shared with them his increas- 
ing profits. His money is not the product of specu- . 
lation; Ford is a stranger to Wall Street and has 
built his business independently of the great bank- 
ing interest. He has enjoyed no monopoly, as 
have the Rockefellers; there are more than three 
hundred makers of automobiles in the United 
States alone. He has spurned all solicitations to 
join combinations. Far from asking tariff favors 


THE AUTOMOBILE 187 


he has entered European markets and undersold 
English, French, and German makers on their own 
ground. Instead of taking advantage of a great 
public demand to increase his prices, Ford has 
continuously lowered them. Though his idealism 
may have led him into an occasional personal 
absurdity, as a business man he may be taken as 
the full flower of American manufacturing genius. 
Possibly America, as a consequence of universal 
war, is advancing to a higher state of industrial 
organization; but an economic system is not en- 
tirely evil that produces such an industry as that 
which has made the automobile the servant of 
millions of Americans. . 


BIBLIOGRAPHICAL NOTE 


THE materials are abundant for the history of American 
industry in the last fifty years. They exist largely in 
the form of official documents. Any one ambitious of 
studyimg this subject in great detail should consult, 
first of all, the catalogs issued by that very valuable in- 
stitution, the Government Printing Office. The Bureau 
of Corporations has published elaborate reports on such 
industries as petroleum (Standard Oil Company), beef, 
tobacco, steel, and harvesting machinery, which are 
indispensable in studying these great basic enterprises. 
The American habit of legislative investigation and 
trust-fighting in the courts, whatever its public value 
may have been, has at least had the result of piling 
up mountains of material for the historian of Ameri- 
ean industry. For one single corporation, the Standard 
Oil Company, a great library of such literature exists. 
The nearly twenty volumes of testimony, exhibits, and 
briefs assembled in the course of the Federal suit which 
led to its dissolution is the ultimate source of material 
on America’s greatest trust. As most of our other great 
corporations —the Steel Trust, the Harvester Com- 
pany, the Tobacco Company, and the like — have passed 
through similar ordeals, all the information the student 
could ask concerning them exists in the same form. 


The archives of such bodies as the Interstate Commerce 
189 


190 BIBLIOGRAPHICAL NOTE 


Commission and Public Utility Commissions of the States 
are also bulging with documentary evidence. Thus all 
the material contained in this volume — and much more 
— concerning the New York traction situation will be 
found in the investigation conducted in 1907 by the Pub- 
lic Service Commission of New York, Second District. 

American business has also developed a great talent 
for publicity. Nearly all our big corporations have 
assembled much material about their own history, all 
of which is public property. Thus the American Tele- 
‘phone and Telegraph Company can furnish detailed 
information on every phase of its business and history. 

‘Indeed, one’s respect for the achievements of American 
industry is increased by the praiseworthy curiosity which 
it displays about its own past and the readiness with 
which it makes such material accessible to the public. 
Despite the abundance of data, there is not a great 
amount of popular writing on these subjects that has 
anuch fascination as literature or much value as history. 
‘The only book that is really important is Miss Ida 
M. Tarbell’s History of the Standard Oil Company, 2 
vols. (new edition 1911). Of other popular volumes the 
present writer has found most useful Herbert N. Cas- 
son’s Romance of Steel (1907), History of the Telephone 
(1910), and Cyrus Hall McCormick: His Life and Work 
(1909); J. H. Bridge’s Inside History of the Carnegie 
Steel Company (1903); Henry Ford’s Own Story as told 
to Rose Wildes Lane (1917). 

For Chapter V, the author has drawn from articles 
contributed by him in 1907-8 to McClure’s Magazine 
on Great American Fortunes and their Making; and for 
Chapter IV, from an article contributed to the same 
magazine in 1914, on Telephones for the Millions. 


INDEX 


Aeme Oil Company, 37 

Agricultural machinery, 149-69 

Alabama, steel in, 77 

American Bell Telephone Com- 
pany, 114-15; see also Amer- 
ican Telephone and Telegraph 
Company, Bell Company 

American Bridge Company, 81 

American Speaking Telephone 
Company, 111 

American Steel and Wire Com- 
pany, 79, 81 

American Sugar Refining Com- 
pany, 170 

American Telephone and Tele- 
graph Company, upright busi- 
ness methods, 92-93; takes 
over American Bell Company, 
115; growth of, 115; bibli- 
ography, 190; see also Ameri- 
can Bell Telephone Company, 
Bell Company 

American Transfer Company, 38 

Andrews, Samuel, associate of 
Rockefeller, 33, 35 

Appleby, J. F., inventor of twine 
binder, 154, 160 

Archbold, J. D., President of 
Acme Oil Company, 37; as- 
sociate of Rockefeller, 42 

Armour and Company, 170 

Aspinwall, William, 12 

Astor, W. B., 10 

Automobiles, 171 e¢ seq. 


Barnum, P. T., 12 
Barrett, J. P., invents telephone 
cable, 103 


Beach, M. Y., Wealthy Men of 
New York, 10, 11 

Bell, A. G., inventor of telephone, 
88; life, 93-94; works on 
“harmonic telegraph,” 94— 
97; invention of telephone, 97— 
98; lectures to finance scheme, 
106; returns to teaching deaf- 
mutes, 113; later activities, 113 

Bell, Mrs. A. G., 92 

Bell Company, Vail as General 
Manager, 107-11; trouble with 
Western Union, 111-13; buys 
Western Union Telephone 
System, 113; see also Ameri- 
can Bell Telephone Company, 
American Telephone and Tele- 
graph Company 

Bennett, Arnold, quoted, 86-87 

Berkman attacks Frick, 72 

Berliner, Emile, invents a tele- 
phone transmitter, 101 

Bessemer, Henry, developed steel 
manufacture, 61-62 

Birmingham (Ala.), steel manu- 
facture in, 77-78 


. Bishop, Japhet, 12 


Bismarck, Prince, quoted, 153- 
154 

Bissell, G. H., interest in refin- 
ing of petroleum, 28-29 

Blake, Francis, invents a tele- 
phone transmitter, 101 

Boston, telephones in, 89 

Brewster, Benjamin, associate of 
Rockefeller, 41 

Broadway railroad franchise, 
136-39 


191 


192 


Brooklyn Rapid Transit, 146 


Calhoun, Patrick, 124 

Carnegie, Andrew, a maker of 
American Steel Age, 59; 
quoted, 60; genius of, 66-69; 
retires from business life, 80; 
sells interests to Morgan, 84 

Carnegie Steel Company, 76, 79 

Carty, J. J., improves telephone, 
93, 102-03 

Chicago, steel production in, 77; 
telephones in, 89; street rail- 
way corruption, 125-26, 142- 
143, 144-45; McCormick es- 
tablishes factory at, 162 

Choate, J. H., 130 

City government, corruption of, 
123-24; see also Chicago, New 
York City 

Civil War, effect on industrial 
development, 13 et seq. 

Cleveland, Grover, 131 

Cleveland, oil refining center, 36; 
steel production in, 77 

Clifford, George, conducts case 
for Western Union against 
Bell Company, 112 

Coal, importation in 1865, 4; 
deposits in U. S., 4-5 

Coggeswell, W. L., 12 

Coleman, Pittsburgh steel mag- 
nate, 66 

Colorado Fuel and Iron Com- 
pany, 57, '77 

Columbia Conduit Company, 39 

Competition in 1865, 7-9 

Conkling, Roscoe, counsel for 
legislative investigation. of 
Broadway franchise, 136, 138 

Conneaut (O.), terminus for ore 
shipping, 75; Carnegie builds 
steel plant at, 82 

Connellsville coal, 71-72 

Cooper, Peter, 12 

Copper importation in 1865, 4 

Cudahy Packing Company, 170 


Daimler, Gottlieb, inventor of 
gasoline engine, 174 


INDEX 


Deering, William, 159-60, ee 

Deering Company, William, 1 

Dolan helps combine rahe 
utilities, 121 

Doolittle, T. B., invents hard- 
drawn n copper wire, 102 

Drake, E. L., drills first oil wells, 
29-30 

Duryea, C. B., constructs | 
mobile, 178 


Edison, T. A., devises telephone : 
transmitter, 101, 112; invents _ 
incandescent light, 121 

Elkins, W. L., helps combine — 
public utilities, 121; in Phila- 
delphia, 123, 129, 134; con- — 
nection with Broadway fran- 
chise, 138; in Chicago, aa 


143, 145 
Emery, Lewis, Jr., builds pipe 
lines, 55 k 
Empire Transportation Com- 
pany, 39 , 
Everett, P. M., discovers iron 
in Minn., 63-64 : 


Federal Steel Company, 81 ¥ 
Flagler, M., associate of — 
Rockefeller, 35, 42 A 
Flower, P., Governor of — 
N. Y., 123-24  : 
Ford, Henry, wealth, 172; life 
and achievements, 176 et seq. 
Forests, beginning of exploita- — 
tion, 3 ; 
Frick, H. C., a maker of Amer- — 
ican Steel Age, 59, 66; personal 
characteristics, 70-71; “coke 
king” of Connellsville, T1-— 
72; receipts in 1900, 80 
Fullgraff, “ boodle alderman” in 
New York street railway cor- 
ruption, 137 


Gates, J. W., introduces wire 
fencing, 78-79; discusses steel 
situation with Morgan, 84 


INDEX 


Glessner, J. J., establishes fac- 
tory for self-binders, 167, 168 

Goodyear, Charles, discovers 
secret of vulcanized rubber, 
174-75 

Gould, G. J., 83 

Gray, Elisha, perfects “‘ harmonic 
telegraph,” 95; invents tele- 
phone, 96-97 

Gulf Refining Company, 56 


Haggerty, John, 12 

Hanna, Mark, 123 

Harmony, Peter, 12 

Haupt, General Herman, builds 
pipe line for Tidewater Com- 
pany, 39 

Haynes, Ellwood, 
automobile, 178 _—.. 

Homestead strikes, 72, 73 

Hostetter builds pipe line for 
Columbia Conduit Company, 


39 

Hubbard, G. G.., interest in Bell’s 
experiments, 94; refuses at 
first to finance telephone, 97; 
places Vail as General Man- 
ager of Bell Company, 106-07; 
later life, 113 

Hudson River Railroad, 23, 24 

Hummings, Rev. Henry, sug- 
gests improvements in tele- 
phone, 101 


constructs 


Immigration after Civil War, 14 

Industrial combinations, Western 
Union Telegraph Company, 9; 
railroads, 9, 23-24; Standard 
Oil Company, 25, 36, 52-54; 
United States Steel Corpora- 
tion, 84-85; International Har- 
vester Company, 153, 167- 
169; see also names of cor- 
porations 

International Harvester Com- 
pany, 153, 167-69 

Interstate Commerce Act (1887), 
48 

Tron, in U. S., 5; in Minn., 63-64 


193 


Jennings, Oliver, associate of 
Rockefeller, 41 

Johnstown (Pa.), steel production 
at, 77 

Joliet. (Ill.), steel production at, 
V7 

Jones, Captain Bill, early maker 
of steel, 66, 68 

Jones, W. H., manufacturer of 
self-binders, 167, 168 


Kansas City, telephones in, 89 

Kelly, William, discovers “‘ Besse- 
mer process”’ of making steel, 
61, 62 

Kemble, W. H., plays part in 
public utilities corruption, 125, 
138 

Kier, S. M., exploits petroleum 
as medicine, 27-28 

Kloman, Pittsburgh steel mag- 
nate, 66 


Land, beginning of exploitation, 
3 


Law, George, 12 

Lenox, James, 11 

London Times, comments on 
invention of telephone, 87; 
ridicules McCormickharvester, 
166 

Lorain (O.), steel production in, 
lel 

Los Angeles, telephones in, 89 


McCandless, 
magnate, 66 

McCormick, C. H., invents 
reaper, 149, 150; life and 
achievement, 154-57; as a 
business man, 160-64; har- 
vester exhibited at London 
Exposition (1851), 166; death | 
(1884), 167; growth of busi- | 
ness, 169 

McCormick, Robert, father of 
C. H., 155-56 

McKay sewing machine, 16 

McQuade, A. J., 137 


Pittsburgh _ steel 


194 


Manufactures, in 1865, 5-7; 
effect of Civil War on, 16-17; 
in early 20th century, 171 

Marsh, C. W., invents improve- 
ment to reaper, 154, 158 

Mercer, J. P., City Treasurer in 
Philadelphia, 127 

Mesaba iron ore range, 57 

Meiropolitan Street Railway 
Company, 139 et seq. 

Metropolitan Traction Company, 
139, 141 (note) 

Minnesota, iron fields of, 63-65 

Monopolies, see Industria] com- 
binations 

Morgan, J. P., 81, 84, 168 

Morris and Company, 170 

Municipal government, see City 
government 


National Packing Company, 170 

National Tube Company, 81, 82 

New York Central Railroad, 
under Vanderbilt, 23-24; re- 
bates granted by, 45-48 

New York City, telephones in, 
88-89; street railways, 119; 
street railway corruption, 135- 
147 

Northcliffe, Lord, telephone de- 
monstration, 86 


Oil, first “oil gusher,” 4; “Oil 
Creek,’’ 26-27; used as medi- 
cine, 27-28; Bissell’s project, 
28-29; Silliman’s report, 28; 
“Drake’s folly,” 29; rush to 
oil-fields, 30; commercial im- 
portance, 31; in Middle West 
and West, 56; see also Standard 
Oil Company 

Osborne, D. M., manufactures 
1arm machinery, 167 


Page, Dr. C. C., article on theory 
of sound, 96 

Pennsylvania, oil in, 26 et seq. 

Pennsylvania Railroad, rebates 


INDEX 


granted by, 44-46; monopoly — 

in and out of Pittsburgh, 83 
Perkins, G. W., 81, 168 
Petroleum, see Oil 


Philadelphia, telephones in, 89; 


public utilities, 121 et seq. 
Phipps, Henry, associate of 
Carnegie, 59, 66, 69-70; re- 
ceipts in 1900, 80 
Pittsburgh as steel center, 74-75 
Public utilities, 119 et seq. 
Public Utility Commissions, 148 
Pupin, M. L., invents “Pupin 
coil,” 93, 103-05 


‘Pure Oil Company, 55, 56 


Railroads, of Civil War days, 2; — 
combinations, 9, 23-24; see 
also Vanderbilt ; 

Rebates, to Standard Oil Com- 
pany, 43-44, 48; to South © 
Improvement Company, 45- 
46; to Carnegie, '76 

Reis, Philip, telephone experi-— 
ments by, 96 

Rockefeller, J. D., 31 et seq. 

Rogers, H. H., associate of 
Rockefeller, 42 

Rural free delivery, 90 

Ryan, T. F., effects combinations 
of public utilities, 121; in Tam- 
many Hall, 123; buys Chicago 
railway system, 126; life and 
character, 132-34; connection 
with New York street railways, — 
137, 138 ' 


Salt manufacture, 27-28 

Sanders, Thomas, patron of Bell, 
94, 95; refuses at first to 
finance telephone. 97; with- 
draws from telephone com- 
pany, 113 , 

Schwab, C. M., 80; associate of 
Carnegie, 59, 66; personal char- 
acteristics, 70-71; reorganizes — 
Homestead Works, 72-73; — 
made President of Carnegie ~ 
Company, 73; to be manager 


INDEX 


; Stewart, A. T., 12 


Schwab, C. M.—Continued 
at Conneaut, 83; discusses 
steel situation with Morgan, 
83-84 

Schwarzschild and Sulzberger, 
170 

Scott, T. A., President of Penn- 
sylvania Railroad, 44, 49, 66; 
makes Carnegie private secre- 
tary, 67; partner of Carnegie, 


Scribner, C. E., inventor of 
multiple switchboard, 93, 103 
Selden, C. B., “inventor of the 

modern automobile,” 175 
Seward, W. H., quoted, 165 
Snarp, Jacob, connection with 

New York street railway cor- 

ruption, 135-36 
Shinn, Pittsburgh steel magnate, 

66 
Shipbuilding, 3 
Shoe manufacture, 6, 16, 171 
Silliman, Benjamin, Jr., report 

on petroleum analysis, 28 
South Improvement Company, 

44-47 
Sprague, F. J., constructs urban 

trolley, 121 
Standard Oil Company, evolution 

typical of economic change, 

3; of Ohio, in 1877, 25; incor- 

porated (1870), 86; develop- 
ment, 36 et seg.; methods of 
marketing oil, 50-51; organ- 
ization, 52-53; Standard Oil 

Trust, 53; of N. J., 53-54; 

combination dissolved, 54; 

financial power of, 57; bihli- 
ography, 189, 190; see also 

Rockefeller 
Steel, increased use of, 58-59; 

growth of industry in America, 

60-61, 75-78; reasons for suc- 

cess in America, 73-74; bibli- 
ography, 189, 190; see also 

Carnegie 
Stetson, F. L., invents “holding 

company,” 139 


195 


Stewart, Pittsburgh steel mag- 
nate, 66 

Stone, Amasa, associate of Rocke- 
feller, 41 

Street railways, 
New York City 

Sumner, W. G., 130 

Swift and Company, 170 


Tammany Hall, 123, 131, 133 

Telephone, 86 ef seq.;  bibli- 
ography, 190 

Texas Refining Company, 56 

Thompson, J. E., 66 

Tidewater Company, 40 

Tilden, S. J., 130 

Tobacco Trust, 170-71, 189 

Transportation, effect of Civil 
War on, 15 

Trusts, see Industrial combina- 
tions 


Tweed, W. M., 130 


United Pipe Line Company, 39 

United States, economic con- 
ditions in 1865, 1 et seq. 

United States Steel Corporation, 
3, 84-85 


Vail, Stephen, 107 

Vail, T. N., General Manager of 
Bell Company, 107 et seq. 

Vanderbilt, Cornelius, 11, 18-24, 
49, 186 

Vanderbilt, W. H., quoted, 41- 
42 

Vandervoort, 
magnate, 66 

Van Syckel, Samuel, discovers 
use of oil pipes, 30 


see Chicago, 


Pittsburgh steel 


Watson, T. A., associate of Bell, 
97, 98, 106, 113-14 

Wealth in 1855, distribution of, 
10-11; sources of, 11-12 

Western Electric Manufacturing 
Company, 114 

Western Union Telegraph Com- 
pany, 9, 88, 101, 111-14 


196 INDEX 


Western Union Telephone Com- delphia, 128, 134; personal 
pany, 113 characteristics and life, 127- 
White, Chief Justice E. D., ren- 129; part in New York street 
ders Standard Oil decision, 54 railway corruption, 138; in 
Whitney, Eli, 154 Chicago, 142, 143, 145 
Whitney, Stephen, 10-11 Withington, C. B., inventor of 


Whitney, W. C., helps combine self-binder, 154, 159 
public utilities, 121; in Tam- 
many Hall, 123; buys Chicago 
railway system, 126; life and | Yerkes, C. T., helps combine 
activities, 130-32; connection public utilities, 121; in Chicago, 
with public utilities corruption, 123, 125-26, 134, 143, 144- 
134, 137, 138, 139, 146-47 145; operations in London, 126 
Widener, P..A. B., helps combine | Youngstown (O)., steel produc- 
public utilities, 121; in Phila- tion at, 77 


tin 


/ 
/ 
/ 


973 J66C v.59 lM 415770 


